HI-Quality Company Updates - Archive


Friday, Aug. 25, 2017


Hormel-HRL reported third quarter sales declined 4% to $2.2 billion with net income falling 7% to $183 million and EPS down 6% to $0.34. Volume declined 9%, cut by divestures and continuing challenges at Jeannie-O Turkey. Despite record-high input costs for pork bellies and beef trim, operating income edged up 1% to a record $278 million on lower advertising and personnel expenditures. By segment, Refrigerated Foods, representing 49% of net sales, declined 6% to $1.1 billion, primarily due to the divestiture of the Farmer John business. HORMEL® BACON 1TM fully cooked bacon, HORMEL® pepperoni, HORMEL® BLACK LABEL® bacon, HORMEL® pepperoni, and HORMEL GATHERINGS® party trays all posted strong sales growth during the quarter. Grocery Products, representing 19% of total sales, increased 6% to $422 million thanks to strong sales of WHOLLY GUACAMOLE® dips, an additional period of JUSTIN'S® specialty nut butters and higher sales of SKIPPY® peanut butter products. Jennie-O Turkey Store sales, representing 17% of sales, declined 9% to $369 million, gobbled up by lower turkey commodity prices and pricing pressure from competing proteins. Specialty Foods sales declined 7% to $197 million on wimpy sales of MUSCLE MILK® protein products. Cash flow from operations was $250 million in the third quarter, up from $213 million last year, due to decreases in working capital. Free cash flow increased 41% year-over-year to $208 million on lower capital expenditures. Fiscal year-to-date free cash flow declined by 14% to $395 million on working capital demands. Hormel returned $350 million to shareholders year-to-date through share repurchases of $94 million and dividends of $256 million. During the quarter, Hormel paid its 356th consecutive quarterly dividend completing its 89th year of dividend payments. Hormel announced strategic investments during the quarter, including the $425 million acquisition of Fontanini Italian Meats and Sausages to complement Hormel’s branded foodservice business while providing much-needed production capacity for the pizza toppings business. Hormel also announced the $104 million acquisition of the Ceratti® brand, a premium value-added meats company in Brazil. In addition, management committed over $130 million to expand production capacity for precooked bacon in Wichita, Kansas to increase bacon capacity. Given expected continued earnings pressure from higher input costs for key raw materials such as bellies, pork trim, and beef trim along with continuing challenges at Jennie-O Turkey Store, Hormel lowered its full year guidance to $1.54 - $1.58 per share from the low end of $1.65 to $1.71 per share.

Wednesday, Aug. 23, 2017


Gentex’s-GNTX Board of Directors authorized the purchase of an additional 15 million shares of its common stock. As of August 23, 2017, including the most recent authorization, the Company has a total of approximately 15.7 million shares remaining available for repurchase. The Company intends to continue to repurchase additional shares of its common stock in the future depending on macroeconomic issues, market trends and other factors that the Company deems appropriate.


Stryker-SYK announced that the company has informed the U.S. Food and Drug Administration (FDA) of a voluntary product recall involving specific lots of Oral Care products sold through the company`s Sage Products business unit (Sage). The recalled products contain Oral Care solutions manufactured for Sage by a third-party supplier and were distributed between July 2015 and August 2017. To date, Stryker has not been made aware of any serious adverse events associated with the Oral Care products recall. However, there have been some reports of minor irritation and allergic reaction. Stryker has discontinued business with the third-party supplier and all Oral Care solutions are being manufactured in-house by Sage. Stryker expects to resume shipping Oral Care products in September and anticipates a return to full supply capacity by year end. Based on the estimated impact to sales and operating income, Stryker now expects full year organic sales growth and adjusted net earnings per diluted share to be at the lower end of its previously stated range of 6.5% to 7.0% and $6.45-$6.55, respectively.


Alphabet-GOOGL is entering a partnership with Walmart to bring hundreds of thousands of products at Walmart that can be purchased through voice with the Assistant on Google Home or on the Google Express website or app to help make shopping faster and easier. Alphabet is offering free delivery within one to three days on Google Express as long as an order is above each store’s minimum.

 

Tuesday, Aug. 22, 2017


Microsoft-MSFT and Halliburton announced a strategic alliance to drive digital transformation across the oil and gas industry. The relationship will combine the expertise of a global leader in cloud and digital transformation with a global leader in exploration and production (E&P) science, software and services. Researchers and engineers from both companies will leverage and optimize Microsoft technologies in machine learning, augmented reality (AR), user interactions and Industrial Internet of Things, as well as Azure's high-performant infrastructure and built-in computing capabilities to deliver tightly integrated solutions across the energy value chain. Areas of collaboration include: applying deep learning to reservoir characterization, modeling and simulation, building domain-specific visualization for mixed reality, creating highly interactive applications and fueling the digitalization of E&P assets. “Halliburton is focused on delivering intelligent cloud solutions to drive the next generation of efficient oil and gas exploration and production,” said Jason Zander, corporate vice president of Microsoft Azure. "We are excited to bring the power of Azure’s hyperscale, hybrid and global cloud platform technologies to this alliance to enhance the value chain for our mutual customers."

Monday, Aug. 21, 2017


Berkshire Hathaway Energy-BRKA confirms its proposal to acquire Energy Future Holdings and its interest in Oncor Electric Delivery Company has been terminated due to a higher bid for Oncor. "We are disappointed our agreement to acquire Oncor has been terminated," said Greg Abel, Berkshire Hathaway Energy chairman, president and CEO. The Berkshire deal included a $270 million break up fee that was to be paid to Berkshire if the deal did not go through. 


Genuine Parts-GPC announced the company has increased the number of shares of its common stock authorized for repurchase by 15 million shares.  Mr. Donahue stated, "The Company will continue to make advantageous purchases from time to time on the open market or in unsolicited negotiated transactions." The Company's share repurchase program originally authorized the repurchase of 15 million shares in August 1994, another 15 million in April 1999, August 2006, and November 2008, for a total authorization of 60 million shares.  Through the current date, the Company has purchased approximately 57.6 million shares under this program and remains authorized to complete the purchase of the approximately 2.4 million shares outstanding.  Mr. Donahue concluded, "We are pleased with the progress in the current repurchase program and believe this additional authorization will help to further enhance shareholder value."


Cisco-CSCO announced its intent to acquire Springpath, Inc., a Sunnyvale-based leader in hyperconvergence software. Springpath has developed a distributed file system purpose-built for hyperconvergence that enables server-based storage systems. The acquisition will allow Cisco to continue to deliver next-generation data center innovation to its customers. Cisco will acquire Springpath for $320 million in cash and assumed equity awards, plus additional retention-based incentives. The acquisition is expected to close in Cisco's first quarter of fiscal year 2018.

 

Thursday, Aug. 17, 2017


Ross Stores-ROST reported second quarter sales rose 8% to $3.4 billion with net income ringing up a 12% gain to $316 million and EPS jumping 16% to $.82. Strong 4% comparable store sales growth was driven by both customer traffic and an increase in the ticket price of the average shopping basket. Sales growth was broad-based by both product category and geographic region led by growth in shoes and home goods and solid growth in the Midwest of the U.S. During the quarter, the company opened 21 new Ross Stores and 7 new dd’s Discounts. For the full year, management plans to open 70 new Ross Stores and 22 new dd’s Discounts. The company’s operating margin expanded 50 basis points to 14.9% and outperformed management’s expectations due to a combination of higher merchandising margin and leverage on above-plan sales gains. Free cash flow for the first half of the year was comparable to last year at $629 million. During the first half, the company paid $125 million in dividends and repurchased 6.9 million of its own shares for $430 million at an average price of about $62.31 per share. Management expects to repurchase $875 million of its shares during fiscal 2017 as part of its two-year $1.75 billion share repurchase authorization. Based on first half results, management expects EPS for the full year to increase 12% to 14% to a range of $3.16 to $3.23 with comparable store sales growth expected to increase 1% to 2% in the second half of the year.


Hormel Foods-HRL announced it has acquired Fontanini Italian Meats and Sausages, a branded foodservice business, from Capitol Wholesale Meats, Inc. The company is based in the Chicago metropolitan area and specializes in authentic Italian meats and sausages, as well as a variety of other premium meat products including pizza toppings and meatballs. The transaction was structured as an asset sale with a purchase price of $425 million.

 

Wednesday, Aug. 16, 2017


Cisco Systems-CSCO reported fourth quarter revenues declined 4% to $12.1 billion with net income and EPS each dropping 14% to $2.4 billion and $.48, respectively. Product revenue was down 5% during the quarter with service revenue up 1%. Product revenue was weak across most business units but rose 5% in Wireless and 3% in Security. Revenue by geographic segment was down 6% in the Americas, down 6% in EMEA and up 6% in APJC. Product gross margin declined in the fourth quarter to 60.3% compared to 62.2% in the prior year period primarily due to memory pricing pressures, which are expected to continue in the next few quarters.  For the full fiscal 2017 year, revenues declined 2% to $48 billion with net income down 11% to $9.6 billion and EPS down 10% to $1.90. Excluding the SP Video CPE Business which was divested, net income would have been flat at $12 billion and non-GAAP EPS would have been up 1% to $2.39. Deferred revenue increased 12% for the year to $18.5 billion with deferred service revenue up 6% and deferred product revenue up 23% driven by subscription-based and software offerings.  The portion of product deferred revenue related to recurring software and subscription offers increased 50%. Return on shareholders’ equity for the year was a solid 14.5%. Free cash flow increased 4% during the year to $12.9 billion. The company returned more than 70% of the free cash flow to shareholders via $5.5 billion in dividends and $3.7 billion in share repurchases as the company repurchased 118 million of its own shares during the year at an average price of $31.38 per share. Since the inception of the repurchase program, Cisco has repurchased and retired 4.7 billion Cisco shares for $100.3 billion at an average price of $21.30 per share. The company ended the year with $70.5 billion in cash and $25.7 billion in long-term debt on its sturdy balance sheet. As Cisco continues its multi-year transition to more of a subscription and software business from a hardware business, management expects fiscal 2018 first quarter revenues to decline 1% to 3% with EPS expected in the range of $.48 to $.53.

Tuesday, Aug. 15, 2017


The TJX Companies-TJX rang up a fashionable 6% increase in second quarter sales to $8.4 billion with net income slipping to $553 million from $562 million last year and EPS up slightly to $0.85 from $0.84 on fewer shares outstanding. Second quarter EPS were hurt by a $0.04 foreign currency headwind, higher wages and losses on inventory hedges. However, merchandise margins increased again this quarter. Consolidated comparable store sales were up 3%, driven by an increase in customer traffic at every TJX division, partially offset by a decline in average retail as this quarter’s hottest categories came with a lower average ticket. Management is confident that TJX is gaining market share at each of its four major divisions. By division, Marmaxx sales increased 4% to $5.3 billion on a 2% increase in comparable store sales. HomeGoods sales increased 17% year-over-year to $1.2 billion on a 7% increase in same store sales. TJX Canada sales increased 10% to $832 million, also on a 7% same store sales increase while TJX International sales increased 4% to $1.1 billion on a 1% same store sales increase. During the quarter, TJX increased its square footage by 5% year-over-year, adding 51 stores bringing the total to 3,913 stores. TJX’s new brand, HomeSense, will launch next week with the opening of its first store in Framingham, MA. During the second quarter, TJX repurchased $550 million of its common shares, retiring 7.5 million shares at an average per share cost of $73.33. During the first half of the year, the company repurchased $900 million of TJX stock, retiring 12 million shares and paid $369 million in dividends, up 20% from last year. During the first half of the year, TJX generated $596 million in free cash flow, bringing the total cash at quarter’s end to nearly $3 billion on its sturdy balance sheet. Looking ahead to the full fiscal year, sales are expected in the $35.6 billion to $35.8 billion range on a 1% to 2% increase in same store sales. EPS are expected in the range of $3.89 to $3.93, up 12% to 14%, marked up in part by an $0.11 benefit from the 53rd week in the fiscal 2018 calendar. Excluding this benefit, adjusted EPS are expected in the range of $3.78 to $3.82, up 7% to 8%. The company now expects to repurchase approximately $1.5 to $1.8 billion of TJX stock in fiscal 2018.


Tuesday, Aug. 8, 2017


Walt Disney-DIS reported fiscal third quarter revenues were flat at $14.2 billion compared to the prior year period  with net income down 9% to $2.4 billion and EPS down 5% to $1.51. Media Networks revenues declined 1% to $5.9 billion with operating income down 22% to $1.8 billion during the quarter due to the expected higher NBA programming costs at ESPN. Parks and Resorts were the bright spot during the quarter with revenues up 12% to $4.9 billion and operating income up a magical 18% to $1.2 billion, reflecting an increase at international operations. Shanghai Disney Resort had a full quarter of operations this year compared to the prior year period which also included pre-opening costs. Shanghai Disney Resort has had 13 million visitors since it opened 14 months ago with extremely high occupancy at the resort hotels. Shanghai Disney is expected to be profitable in its first full year of operations. Studio Entertainment revenues declined 16% during the quarter to $2.4 billion with operating income down 17% to $639 million due to tough comparisons with the prior year period. Consumer Products and Interactive Media revenues declined 5% to $1.1 billion with operating income up 12% to $362 million thanks to increases in the merchandising and games businesses. Year-to-date free cash flow increased 3% to $6.1 billion with Disney paying $1.2 billion of dividends and repurchasing 64.3 million of its own shares for $6.8 billion at an average cost of $105.75 per share. Management remains committed to repurchasing $9 billion to $10 billion of its shares for the full year. Disney announced plans to acquire an additional 42% stake in BAMTech, a global leader in direct-to-consumer streaming technology and marketing services, data analytics and commerce management for $1.58 billion. Disney previously had acquired a 33% stake in BAMTech and now with its majority ownership, Disney plans to launch its ESPN-branded multi-sports video streaming service in early 2018 followed by a new Disney-branded direct-to-consumer streaming service in 2019. With this strategic shift in the way Disney plans to distribute their content, they plan to end their distribution agreement with Netflix for subscription streaming of new releases beginning in 2019. Management believes this new strategy will enable them to leverage the strength of their great brands with the direct-to-consumer services marking a new growth opportunity for the firm. The BamTech transaction is expected to be modestly dilutive to Disney’s earnings per share for two years. Additional dilution will be dependent on the company’s licensing approach and the level of investment in original programming.


The Priceline Group-PCLN booked second quarter revenues of $3 billion, up 18% year-over-year, with net income and EPS up 24% to $720 million and $14.39, respectively. Gross profit increased 21% to $2.95 billion. Second quarter gross bookings —the total value of all travel services booked by the company’s customers — were $20.8 billion, up 16%, or 19% on a constant currency basis. Room nights sold increased 21% to 170.2 million, rental car days increased 12% to 20.7 million while airline tickets sold declined 9% to 1.8 million. During the quarter, Bookings.com added 150,000 properties to its platform, bringing the total number of properties to 1.3 million, up 39% from last year. During the second quarter, Priceline repurchased $344 million of its shares. Year-to-date, Priceline generated $1.5 billion in free cash flow, up 16% from last year’s first half, bringing the total amount of cash and investments on its five-star balance sheet to $16.6 billion. Looking ahead to the third quarter, Priceline expects room nights booked and total gross travel bookings to increase by 11% to 16%. Gross profit is expected to increase 15.5% to 20.5%, or 12.5% to 17.5% on a constant currency basis. Net income and EPS adjusted for specified items including the $940 million, or $18.70 per share, goodwill impairment charge recorded during last year’s third quarter, are expected to increase 4% to 9%. The decline in the rate of earnings growth is due to the timing in brand advertising and difficult comps as bookings accelerated during the second half of 2016. During the quarterly conference call, Mr. Fogel, Priceline Group CEO, remarked, "We are pleased with the performance of the business and will continue to build our franchise by adding properties to the platform and by investing in technology, customer experience and content expansion."

Saturday, Aug. 5, 2017


Berkshire Hathaway-BRKB reported the company’s net worth during the first half of 2017 increased by 6.2% with book value equal to $182,816 per Class A share as of 6/30/17. The $17.7 billion increase in shareholders’ equity was due to the company’s $8.3 billion in net earnings during the first half and approximately $9.4 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation.  

Berkshire’s five major investment holdings, representing 62% of total equities,  had mixed results since 12-31-16. Wells Fargo’s stock declined 1% to $27.3 billion amid continued negative headlines on business practices and increased legal costs. Apple became the apple of Buffett’s eye as the position size more than doubled since year end to $19.4 billion through appreciation and additional purchases.  Since year end, the American Express position charged 14% higher to $12.8 billion and Coca-Cola’s stock popped 8% to $17.9 billion.  On the other hand, the IBM stake dropped 39% to $8.3 billion as Buffett shed a significant amount of his IBM shares.   

Berkshire’s second quarter operating revenues rose 7% to $57.4 billion with all operating business groups contributing to the growth led by 13% revenue growth from the insurance group and 15% growth from the BNSF railroad.  Net income declined 15% during the quarter to $4.3 billion.   Operating earnings (excluding investment and derivative gains/losses) declined 11% during the second quarter to $4.1 billion, due primarily to losses from underwriting in the insurance businesses and the impact of foreign currency exchange rate losses.  

Berkshire’s insurance underwriting operations generated a $22 million loss during the second quarter compared to a $337 million profit in the prior year period.  Underwriting gains from GEICO, General Re and Berkshire Hathaway Primary Group were more than offset by $400 million in underwriting losses from Berkshire Hathaway Reinsurance Group due primarily to the increased deferred charge amortization related to the reinsurance businesses including the AIG Agreement.  Insurance investment income was 1% lower at $965 million during the quarter due to lower dividend income from the redemption of Dow Chemical’s preferred stock.  The float of the insurance operations approximated a whopping $107 billion as of 6/30/17, an increase of $16 billion since 12/31/16 related in large part to the AIG deal. The average cost of float in the first half of the year was about .4% due to the aggregate pre-tax underwriting loss of $403 million.

Burlington Northern Santa Fe’s (BNSF) revenues rose 15% during the second quarter to $5.2 billion with net earnings chugging 24% higher to $958 million. During the first half, BNSFgenerated a 4.1% comparative increase in average revenue per car/unit and a 7.6% increase in volume. Year-to-date volume was 5 million cars/units driven by a rebound in freight revenue growth from coal and broad-based growth from consumer products, industrial products and agricultural products thanks to improving economic conditions.  Berkshire expects overall volume growth will moderate in the second half of 2017.

Berkshire Hathaway Energy reported revenues increased 8% to $4.6 billion during the second quarter with all divisions except Northern Powergrid contributing to the revenue growth. Net earnings charged 7% higher during the quarter to $516 million due to earnings improvements at NV Energy, a 19% increase in the real estate brokerage business earnings due to recent acquisitions, and a lower tax rate.  

Berkshire’s manufacturing businesses reported a 4% increase in revenue growth in the quarter to $12.7 billion with operating earnings up 15% to $1.9 billion. The results reflected in part the acquisitions of Precision Castparts and Duracell.  Growth was led by the Building products unit as revenues increased 10% to $3.1 billion  due to bolt-on acquisitions by Shaw and MiTek as  pre-tax earnings rebounded 31% to $401 million.

Service and Retailing revenues rose 4% during the quarter to $19.1 billion with pre-tax earnings up 7% to $624 million. Service revenues rose 8% to $3.8 billion with operating earnings soaring 19% to $351 million primarily due to improvements at NetJets and volume increases at most of TTI’s operations.   Retailing revenues declined 1% during the quarter to $3.8 billion with operating earnings up 27% to $204 million. The revenue decrease reflected a decline in revenues at Berkshire Hathaway Automotive (BHA) due to lower vehicle units sold. The increase in earnings was due to higher earnings from BHA, the home furnishing retailers, Pampered Chef and See’s Candies.  McLane’s revenues rose 4% during the quarter to $12.6 billion due to a 4.6% increase in grocery sales. However, operating earnings declined 47% to $69 million due to significant pricing pressures in an increasingly competitive grocery business environment. 

Finance and Financial Products revenues rose 2% during the quarter to $2 billion with net income declining 16% to $332 million. The revenue increase was due to a 13% increase in home sales at Clayton Homes, reflecting higher unit sales and higher average prices.  Earnings were negatively impacted by the transportation and equipment leasing business, lower earnings from CORT furniture leasing and lower dividend and interest income on investments.   

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $300.7 billion as of 6/30/17. Excluding utility and finance investments, Berkshire ended the quarter with $277.3 billion in investments allocated approximately 48.8% to equities ($135.3 billion), 8.4% to fixed-income investments ($23.4 billion), 6.1% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($16.8 billion), 5.6% to Kraft Heinz ($15.6 billion, with a fair value of $27.9 billion as of 6-30-17), and 31.1% in cash and equivalents ($86.2 billion).  

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $19 billion.  Berkshire expects the acquisition of Medical Liability Mutual Insurance Company with 3-31-17 assets and policyholders’ surplus of $5.6 billion and $2.1 billion, respectively, to close in late 2017. On July 7, 2017, Berkshire Hathaway Energy agreed to acquire 80.3% of Oncor Electric Delivery Company for $9 billion with the intention to acquire the remaining 19.7% through separate agreements with this transaction expected to close in the fourth quarter of 2017.

Free cash flow more than doubled during the first half to $21.5 billion, due primarily to the big boost to float from the AIG deal.  During the first half, capital expenditures declined 16% to approximately $5.1 billion, including $1.8 billion by Berkshire Hathaway Energy and $1.5 billion by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $4.8 billion over the balance of 2017 for these two businesses. During the first half of 2017, Berkshire purchased a net $14.2 billion in Treasury Bills and fixed-income investments and purchased a net $5.8 billion of equity securities, including the purchase of Apple and the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.   

Berkshire Hathaway’s stock appears fairly valued, currently trading at $270,000 per A share and $180 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $224,000-$285,000 per share and the B shares to trade between $150-$190 per share.  Hold.

 

Friday, Aug. 4, 2017


Fastenal-FAST reported July net sales increased 12.9% to $350 million with average daily sales also up 12.9% to $17.5 million. Daily sales growth by end market was up 14.2% in manufacturing and 6.6% in non-residential construction. Daily sales growth by product line was 11.3% in fasteners and 14.1% in other products. Year-to-date, the company has opened 12 new locations and ended the quarter with 2,453 branch locations. Total personnel remained relatively flat at 20,230.


Automatic Data Processing-ADP issued the following statement regarding ADP's recent communications from Pershing Square Capital Management that Pershing is seeking effective control of ADP through five Board seats at ADP's 2017 Annual Meeting as well as a CEO change. "Pershing first contacted ADP on August 1, and William Ackman said it beneficially owns 8% of ADP, largely in derivatives. Mr. Ackman requested that ADP extend the August 10 deadline for nomination of directors by 30 to 45 days and said he planned to nominate five directors, including himself, to ADP's 10-member Board. He also said CEO Carlos Rodriguez should be replaced." "ADP is open to constructive input from our shareholders, and our Board respects the right of shareholders to nominate directors. However, ADP has a clearly defined Board nomination process, and the 2017 deadline for director nominations has been public for nearly a year. The Board has unanimously determined that it is not in the best interests of ADP or its other shareholders to accede to Pershing Square's last-minute request for an extension." "Since Carlos Rodriguez became CEO nearly six years ago, ADP's total shareholder return of 202% is well in excess of the S&P 500 TSR of 128% -- and is many multiples of Pershing's TSR of 29%." "ADP has a strong and independent Board, including four new directors who have joined since 2014: Michael Gregoire, CEO of CA Technologies; Peter Bisson, former global leader of McKinsey's High Tech Practice; William Ready, EVP and Chief Operating Officer of PayPal; and Sandra Wijnberg, Executive Advisor and former Partner of Aquiline Holdings. These directors have deep expertise in technology, operations and finance and provide important perspective on advancing ADP's global strategy." "We believe our current Board has an effective balance of leadership continuity and fresh perspectives that will help us to continue this strong track record of delivering value to shareholders while successfully executing on our 'All in on HCM' strategy."

Thursday, Aug. 3, 2017


Fluor-FLR reported disappointing second quarter results with revenues down 3% to $4.7 billion. The company reported a loss during the quarter of $24 million or $.17 per share compared to a profit of $102 million or $.72 per share in the prior year period. Results for the quarter included an after-tax charge of $124 million, or $.89 per share, for estimated cost increases on three gas-fired power projects. Due to the continued challenges on gas-fired power projects, Fluor has made recent management and organizational changes in the power segment and is changing its review process. New awards for the quarter were $3.2 billion, including $1.1 billion in Government, $860 million in Energy, Chemicals and Mining, $672 million in Industrial, Infrastructure and Power and $554 million in Diversified Services. Consolidated backlog declined in every business segment to $37.6 billion at the end of the quarter compared to $47.2 billion in the prior year period. Lack of clarity on government regulatory reform has slowed awards. Free cash flow increased in the first half to $286.3 million with the company paying $59.3 million in dividends, which remained flat with the prior year period. As a result of the charge during the quarter and the wind down of a nuclear project, the company is once again lowering its 2017 EPS guidance to a range of $1.40 to $1.70 from the previous range of $2.25 to $2.75. Management acknowledged that they had lost credibility with investors due to poor execution and would be working hard to regain trust.


Cognizant Technology Solutions-CTSH reported second quarter sales increased a healthy 9% to $3.7 billion with net income and EPS nearly doubling to $470 million and $0.80, respectively. Excluding the 2016 income tax expense related to a one-time $2.8 billion remittance from the company’s Indian subsidiary to non-Indian Cognizant entities and other specific items, adjusted EPS of $0.93 increased 7% year-over-year. Consulting & Technology Service revenue, which accounted for 59% of total sales during the quarter, increased 11%, reflecting robust demand for digital enterprise solutions. Outsourcing Services increased a slower 6% due to the timing of client engagements, which are expected to pick up in the second half of the year. Three of Cognizant’s four segments delivered double-digit growth with Healthcare up 10% to $1.1 billion, Products and Resources (manufacturing and logistics) up 13% to $747 million and Communications, Media and Technology up 17% to $467 million. Financial Services revenues increased 4% to $1.4 billion, largely driven by insurance companies. Large money-center banks continue to take a conservative approach to spend with a focus on optimizing costs while sales to mid-tier banking accounts remained quite strong. Quarter-end headcount stood at 256,800, down 4,400 mainly in response to the company’s voluntary separation offer made to employees as Cognizant realigns its resources with its digital transformation business opportunities. Cognizant’s balance sheet remains very healthy with $4.4 billion of cash and short-term investments. Net of debt, this was down by $900 million from December 31, reflecting the use of cash on hand to primarily fund the ASR. Cognizant expects to complete its $1.5 billion accelerated share repurchase program in the third quarter. Year-to-date, Cognizant has returned $1.6 billion to shareholders through dividends of $89 million and share repurchases of $1.5 billion. Given the strong first half of the year, management raised the low end of its full year revenue growth guidance to 9% to 10% (from previous guidance of 8% to 10%) with 2017 revenues now expected in the $14.7 to $14.84 billion range and adjusted EPS of at least $3.67.



Becton, Dickinson and Company-BDX reported  third fiscal quarter revenues of $3 billion, down 5%  from last year’s third quarter, primarily due to the Respiratory Solutions business divestiture that was completed in October 2016 and foreign currency headwinds  On a comparable, currency-neutral basis, third quarter revenues grew 2.4%. Becton Dickinson reported a third quarter loss of $165 million, or $0.75 per share, compared to net income of $390 million, or $1.80 per share, reported last year. This year’s third quarter results were hurt by a $741 million charge related to the company’s decision to amend provisions for dispensing equipment leases within the Medication Management Solutions business. Lease modifications, which allow for more customer flexibility, were made in conjunction with Becton Dickinson’s new “go-to-market” business model.  By business segment, BD Medical revenues fell 9% to $2 billion in the wake of the Respiratory Solutions divestiture. Comparable, currency-neutral revenues increased 1.3% year-over-year, reflecting solid performance in Medication and Procedural Solutions, Diabetes Care and Pharmaceutical Systems. BD Life Sciences sales of $997 million increased 3.5% year-over-year, reflecting strong performance in the Biosciences unit and solid growth in the Diagnostic Systems and Preanalytical Systems units. Year-to-date free cash flow declined 34% to $957 million on lower earnings and working capital changes.  At June 30, 2017, Becton Dickinson held $13.9 billion in cash and equivalents, which included net proceeds raised through public offerings of stock and debt during the third quarter of about $4.8 billion and $9.6 billion, respectively. Debt issued by Becton Dickinson during the quarter matures in 2019 through 2047 with coupons of 2.1% to 4.7%. During the first nine months of fiscal year 2017, the company paid cash dividends of $478 million and also repurchased about $220 million of stock under an accelerated share repurchase agreement. Management made good progress during the quarter on integrating the Carefusion acquisition and will leverage lessons learned during the process in the $24 billion C.R. Bard acquisition, which is expected to close before calendar year-end. Becton Dickinson expects full fiscal year 2017 revenues to decrease 3% to 3.5%, primarily due to the Respiratory Solutions business divestiture.  This is an improvement from previously issued guidance of a 3.5% to 4% decrease, thanks to favorable foreign currency movements. Comparable, currency-neutral revenues will increase 4.5% to 5%. EPS are expected in the $5.10 and $5.15 range, up 14% to 15%.  Becton Dickinson raised its adjusted EPS guidance to be between $9.42 and $9.47, up 10% from fiscal 2016.


Maximus-MMS reported third quarter revenues decreased 3% to $600.4 million principally due to foreign currency impacts and the expected wind down of a Veterans Affairs subcontract in the U.S. Federal Services Segment. Despite the lower revenues, operating margin remained relatively flat during the quarter at a solid 13.6%. Net income and EPS during the quarter each rose 9% to $56.9 million and $.86, respectively, benefiting from research and development tax credits related to tax returns for prior years, which added $.06 per share to the bottom line.  Free cash flow more than doubled during the first nine months to $206 million with the company repaying most of their credit facility and long-term debt, paying $8.8 million in dividends and repurchasing $28.9 million of its own share during the same time period. While no share repurchases occurred during the third quarter, the company has $109 million remaining authorized for future share repurchases. The company’s capital allocation priorities remain first to use cash for selective acquisitions, then to pay the dividend and then for opportunistic share repurchases. Year-to-date signed contract awards at 6/30/17 totaled $1.8 billion with contracts pending (awarded but unsigned) totaling $259.8 million. The sales pipeline at quarter end was $3.3 billion comprised of $800 million in proposals pending, $700 million in proposals in preparation and $1.8 billion in opportunities tracking. Approximately $3.3 billion of the pipeline is new work and reflects opportunities across all three business segments. Maximus continues to see a general slowdown and procurement delays in the federal market due to the transition in Washington. Maximus reiterated it revenue guidance for fiscal 2017 with revenues expected to come in at the low end of the $2.425 billion to $2.475 billion range. Management raised their fiscal 2017 EPS outlook to a range of $3.05 to $3.15 from prior guidance of $3.00 to $3.10, primarily due to the tax credit recorded in the third quarter.


Bioverativ-BIVV reported second quarter revenues rose a healthy 38% to $289.1 million with net income up 21% to $77.1 million and EPS up 20% to $.71. These strong results were driven by 29% product revenue growth as ELOCTATE continues to capture both new patients and patients switching from short-acting therapies and benefits from an increased shift to prophylactic treatments in hemophilia A. Despite increasing competition in hemophilia B, ALPROLIX benefited from patients moving from on-demand to prophylactic treatment. Collaboration revenues continued to deliver strong growth as both royalty and contract manufacturing revenues increased significantly during the quarter. During the quarter, Bioverativ completed the acquisition of True North Therapeutics, a rare disease biotechnology company, for $395.7 million through a combination of cash on hand and borrowings. As of quarter end, Bioverativ had $137.4 million in cash and $49.5 million in short-term debt. Given strong execution in the quarter, management raised their outlook for revenue growth for the full 2017 year to 23% to 25% growth with the operating margin expected in the range of 36% to 39%.

Wednesday, Aug. 2, 2017


The Cheesecake Factory-CAKE reported second quarter revenues rose 2%, with comparable store sales down .5%, to $569.9 million with net income dipping 1% to $38.2 million and EPS flat at $.78 compared to the prior year period. The quarter came in softer than expected with weak sales trends attributed to uncertainty on the part of many consumers and unfavorable weather in the East and Midwest. The company plans to open as many as eight company-owned restaurants in fiscal 2017, including one relocation. In addition, the company expects to open as many as four restaurants under licensing agreements internationally in fiscal 2017, including the first location that opened in Hong Kong to much success. During the first half, the firm generated $114 million in cash flow from operations and $61 million in free cash flow after spending $53 million on capital expenditures. Given the stability of the company’s cash flows and positive long-term prospects for the business, the board increased the quarterly dividend a sweet 21% to $.29 per share. During the second quarter, the company repurchased 400 million of its own shares at a cost of $21.3 million at an average price of $53.25 per share with the company planning to repurchase about $125 million of its shares for the full fiscal 2017 year as management plans to return substantially all of its free cash flow to shareholders through dividends and share repurchases. Given the continued softness in restaurant industry spending and an increasingly competitive business environment, management lowered their outlook for sales and earnings for the full year with comparable store sales now expected to decline 1% for the full year and 2017 EPS expected in the range of $2.62 to $2.70, representing a disappointing 5% to 7% decline in earnings per share from the prior year, compared to previous guidance of EPS in the range of $2.93 to $3.02.


AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) has approved IMBRUVICA® (ibrutinib) for the treatment of adult patients with chronic graft-versus-host-disease (cGVHD) after failure of one or more lines of systemic therapy.1With this approval, IMBRUVICA becomes the first and only therapy specifically approved for adults with cGVHD, a serious and debilitating potential consequence of stem cell or bone marrow transplant.IMBRUVICA, a first-in-class Bruton's tyrosine kinase (BTK) inhibitor, is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc, a unit of Johnson & Johnson-JNJ. "Stem cell and bone marrow transplants can be life-saving treatment options for people with blood cancers or marrow failure syndromes; however, nearly half of transplant patients subsequently develop chronic graft-versus-host-disease, or cGVHD, in which the donor's immune cells damage the patient's normal organs and their quality of life," said David Miklos, M.D., Ph.D., Associate Professor of Medicine (Blood and Marrow Transplantation), Stanford University, and lead investigator of the IMBRUVICA cGVHD clinical study.* "With IMBRUVICA, we observed sustained responses lasting five months or longer across multiple organs affected by this debilitating condition for 48 percent of all patients. This approval represents a major advance and provides physicians with a new option for adults with steroid refractory cGVHD."

 


Private sector employment increased by 178,000 jobs from June to July according to the July ADP National Employment Report®. "Job gains continued to be strong in the month of July," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "However, as the labor market tightens employers may find it more difficult to recruit qualified workers." Mark Zandi, chief economist of Moody's Analytics, said, "The American job machine continues to operate in high gear. Job gains are broad-based across industries and company sizes, with only manufacturers reducing their payrolls. At this pace of job growth, unemployment will continue to quickly decline." 

Tuesday, Aug. 1, 2017


Apple-AAPL reported strong third quarter results with revenues rising 7% to $45.4 billion, net income climbing 12% to $8.7 billion and EPS jumping 18% to $1.67. These results were driven by unit and revenue growth in all product categories. iPhone units grew 2% during the quarter to 41 million with revenues growing 3% to $24.8 billion as the average selling price expanded 2% to $606 per phone thanks to continued strong demand for the iPhone 7 Plus. Over the past decade, Apple has sold a cumulative 1.2 billion iPhones. With a large installed base available for upgrades, a higher number of Android folks switching to Apple and first time buyers in emerging markets relatively untapped, opportunities continue to abound for future iPhone growth. Mac units grew 1% during the quarter to 4.3 million units with revenues up 7% to $5.6 billion as the Mac continued to gain market share. The iPad resumed growth in the quarter with 15% growth in units to 11.4 million with revenues up 2% to $5 billion during the quarter as the iPad boasts 89% market share for tablets costing more than $200. Services revenues grew 22% during the quarter to a record $7.3 billion (the size of a Fortune 100 company) thanks in large part to sales in the App Store, music streaming and iCloud storage. Subscribers to Apple’s Services increased by 20 million to 185 million subscribers at quarter end. Apple Pay is growing around the world and is the number one mobile payment service encompassing 90% of global transactions on mobile phones. Other Products increased 23% to $2.7 billion during the quarter led by 50% growth in the Apple Watch, which is the number one smart watch in the world. Tim Cook, the company’s CEO, is very excited about new products coming out this fall across all product lines. Augmented reality is expected to be “big and profound and one of the huge things we will marvel about” as it enhances entertainment, gaming and consumer and enterprise experiences. On a geographic basis, Apple generated double-digit growth in the Americas, Europe and the Rest of Asia Pacific, with Greater China being the laggard experiencing a 10% decline in revenues to $8 billion. Free cash flow declined 4% during the first nine months of the year to $39.3 billion due to working capital fluctuations. During the first nine months, Apple paid $9.5 billion in dividends and repurchased $25 billion of its own shares, including 30.4 million shares repurchased in the third quarter for $4.5 billion at an average price of $148.03 per share. As of quarter end, Apple has completed $229 billion of its $300 billion capital return program and still ended the quarter with a whopping $261.5 billion in cash and investments and $90 billion in long-term debt as 94% of its cash is held outside the U.S. Apple’s outlook for the fourth quarter is for revenues between $49 billion and $52 billion, gross margin between 37.5% and 38%, operating expenses between $6.7 billion and $6.8 billion, other income of $100 million and a tax rate of 25.5%.

Friday, July 28, 2017


Stryker-SYK reported second quarter sales increased a healthy 6% to $3 billion with net income and EPS increasing 3% to $391 million and $1.03, respectively. Excluding items related to recalls, restructuring and acquisitions, adjusted EPS increased 10% year-over-year to $1.53, topping the high-end of the company’s guidance. All of Stryker’s segments, Orthopaedics, MedSurg and Neurotechnology & Spine delivered strong top-line gains. Growth was well-balanced geographically with organic growth of 7% to $2.2 billion in the U.S. and 5.5% to $811 million outside the U.S.  Orthopaedics net sales of $1.1 billion increased 5.5% in the quarter, including 8.6% from increased unit volume, partially offset by 2.4% due to lower prices. MedSurg net sales of $1.3 billion increased 6.2% in the quarter, including  7.1% from increased unit volume, partially offset by 0.4% due to lower prices. Neurotechnology & Spine net sales of $500 million increased 7% in the quarter, including 10% from increased unit volume, partially offset by 2% due to lower prices. During the quarter, Stryker installed 26 MAKO robots globally, a 50% increase from last year. Training on the MAKO Total Knee continues at a solid pace with more than 400 surgeons trained to-date, helping to drive MAKO Total Knee surgeries since launch to more than 5,000. On the clinical front, Stryker continues to gather data to quantify measured outcomes with respect to hospital stay, return to work, range of motion, stability, discharge to rehab and patient satisfaction for both MAKO and traditional knee replacements. Stryker expects to begin reporting the data in 2018 and believes the data will drive ongoing knee market share gains. Year-to-date, Stryker has generated $531 million in free cash flow, up 1% from last year, and representing 64% of reported net earnings. In June, Stryker announced the acquisition of NOVADAQ, a leading developer of fluorescent imaging technology used in a variety of procedures including cardiac, general, colon and plastic surgery. NOVADAQ’s technology complements Stryker’s portfolio of visualization technologies and will allow the company to expand into new surgical procedures where it does not currently compete. The $701 million deal, net of roughly $47 million in cash, is expected to close during the third quarter. Year-to-date, Stryker has returned $548 million to shareholders through dividends of $318 million and share repurchases of $230 million. No shares were repurchased during the second quarter. Stryker’s balance sheet remains strong with $3.7 billion of cash and marketable securities with about 89% held outside the U.S. Based on the healthy first half performance, Stryker now expects 2017  organic sales growth to be in the range of 6.5% to 7%,  compared with prior guidance of 5.5% to 6.5%.  Adjusted EPS is now expected in the range of $6.45 to $6.55 excluding anticipated dilution from the NOVADAQ acquisition of $.03 to $.05.  Stryker’s prior adjusted EPS guidance range was $6.35 to $6.45.



AbbVie-ABBV reported second quarter sales increased a healthy 8% to $6.9 billion with net income up 19% to $1.9 billion and EPS up 21% to $1.19. Adjusted net earnings and EPS increased 10.5% and 12.7%, respectively. Global HUMIRA sales increased a healthy 13.7% to $4.7 billion despite increasing competition from new classes of drugs and biosimilars. In the U.S., HUMIRA sales grew 18% to $3.2 billion while international HUMIRA sales grew 5.5% to $1.5 billion, including a 3.6% unfavorable impact from foreign exchange. Second-quarter global IMBRUVICA, AbbVie’s drug to treat leukemia, net revenues were $626 million, with U.S. sales of $528 million and international profit sharing of $98 million for the quarter, reflecting growth of 42.6%. AbbVie made significant progress on its pipeline during the quarter including positive top-line results from its new drug to treat severe rheumatoid arthritis and phase 2 studies for patients with Crohn’s disease. After second quarter earnings were released, AbbVie announced the European Commission (EC) granted marketing authorization for MAVIRET®, a once-daily, ribavirin-free treatment for adults with chronic hepatitis C virus (HCV) infection across all major genotypes. MAVIRET is a new, 8-week, pan-genotypic treatment for patients without cirrhosis and new to treatment, who comprise the majority of the estimated 71 million people worldwide living with HCV. AbbVie also reported positive data on new indications for IMBRUVICA. Asked during the conference call about the deployment of AbbVie’s ever-growing cash stash, Richard A. Gonzalez, chairman and CEO, commented on priorities for cash. The first prioirty is to build the pipeline, then to reinvest in the business through acquisitions, next growing the dividend and then repurchasing shares opportunistically. If tax reform were to occur, which is impossible to handicap, greater access to AbbVie’s overseas cash would provide the company with many options to grow the business and reward shareholders. AbbVie confirmed its EPS guidance for the full-year 2017 of $4.55 to $4.65 with adjusted EPS for the full-year 2017 of $5.44 to $5.54, representing growth of 13.9% at the mid-point.

The European Commission (EC) has granted AbbVie-ABBV marketing authorization for MAVIRET®, a once-daily, ribavirin-free treatment for adults with chronic hepatitis C virus (HCV) infection across all major genotypes (GT1-6). MAVIRET is a new, 8-week, pan-genotypic treatment for patients without cirrhosis and new to treatment, who comprise the majority of the estimated 71 million people worldwide living with HCV. EC authorization is supported by data from AbbVie’s registrational studies showing a combined 97.5% cure rate with just 8 weeks of treatment in GT1-6 patients without cirrhosis and new to treatment. This high cure rate was achieved in patients with varied patient and viral characteristics and including those with difficult-to-treat CKD. For compensated cirrhotic patients, a 98% cure rate was achieved with 12 weeks of treatment. For GT3 treatment-experienced patients with or without compensated cirrhosis, a 96% cure rate was achieved with 16 weeks of treatment. Less than 0.1% of patients discontinued treatment due to adverse reactions. The most commonly reported adverse reactions were headache and fatigue.



Starbucks-SBUX reported third quarter revenues rose 8% to $5.7 billion with net income and EPS dropping 8% to $692 million and $.47, respectively. Global comparable store sales increased 4% with U.S. comp store sales up 5%, driven by a 5% increase in average ticket. China comp store sales increased 7%, driven by a 5% increase in transactions. Starbucks opened 575 net new stores during the quarter, bringing the total store count to 26,736 in 75 countries. By fiscal 2021, the company plans to open 12,000 new stores globally. Active membership in Starbucks Rewards grew 8% from last year’s third quarter to 13.3 million members. Starbucks Rewards represented 36% of U.S. company-operated sales in the quarter with Mobile Payment reaching 30% of transactions and Mobile Order and Pay growing to 9% of transactions. The company’s third quarter operating margin declined 110 basis points to 18.4%, primarily due to $102 million of goodwill and store asset impairment charges related to Teavana. Management concluded that underperformance of Teavana’s mall-based stores is likely to persist. As a result, Starbucks will close all 379 Teavana stores during the coming year. While additional Teavana related charges will be incurred during the next several quarters, management expects the elimination of ongoing Teavana operating losses and associated overhead will result in a fairly rapid exit cost payback period. The company is investing in a new generation of digital innovation that will begin rolling out in waves starting this fall. Starbuck’s new technology stack provides a scalable cloud-based platform for rewards and ordering, improved customer data organization and tighter integration with store-based operating systems, including inventory and production management. In addition, Starbucks announced that it will acquire the remaining 50% stake in its East China operations for $1.3 billion from its joint venture partners. The purchase gives Starbucks complete control of its 1,300 stores in the Shanghai, Jiangsu and Zhejiang provinces. Mainland China is Starbucks largest and fastest growing international market with 2,800 stores in 130 cities. The company expects the acquisition to add $1 billion in revenue during the first year following closing of the deal. The company repurchased 3.5 million of its shares in the third quarter with 95 million shares remaining authorized for future share repurchases. Year-to-date, Starbucks has returned $1.2 billion to shareholders through share repurchases. Returning cash to shareholders remains a priority with Starbucks targeting a 40% to 50% dividend payout ratio. Given the choppy retail environment, Starbucks lowered its fiscal revenue growth outlook to the low end of the previously forecasted 8% - 10% range, excluding one point of FX and two points of impact from the 53rd week in fiscal 2016. EPS guidance for fiscal 2017 was lowered from $2.08- $2.12 to $1.96 - $1.97, up 3% to 4% from 2016.


Thursday, July 27, 2017


UPS-UPS delivered strong second quarter results with revenue up 8% to $15.8 billion, net earnings up 9% to $1.4 billion and EPS up 11% to $1.58. Revenue increased in all segments and major categories as increased customer demand spread across UPS’s broad product portfolio. U.S. Domestic Segment sales increased 8% to $9.7 billion, driven by growing demand for e-commerce deliveries, base-price increases and higher fuel surcharges. U.S. Domestic operating profit increased more than 13% to $1.4 billion on a 60 basis point profit margin expansion to 14.3%. Despite strong foreign currency headwinds, International Segment sales grew 3% to $3.2 billion, fueled by demand for UPS’s export solutions. International shipments jumped 12%, led by mid-teen growth in Europe and double-digit growth in China. While reported International operating profits declined 5% to $583 million, foreign currency neutral operating profits increased 14%. The Supply Chain and Freight Segment reported a 12% increase in revenue to $2.8 billion on the heels of improving economic conditions across all of UPS’s non-retail markets. Supply Chain Segment operating profits improved 24% year-over-year to $238 million. Year-to-date, UPS has generated $2.6 billion in operating cash flow. Earlier in the year, UPS stepped up its pace of investment in its network to capture “tremendous e-commerce and international growth opportunities.” To that end, the company has invested $2 billion year-to-date in creating its next generation smart, global logistics network. This year, UPS has paid dividends of nearly $1.4 billion, up 6.4% from last year, providing a current dividend yield of about 3%. So far this year, the company has repurchased 8.4 million shares for about $900 million, or $107.14 per average share. Looking ahead, UPS expects foreign currency headwinds and continued costs for strategic initiatives to weigh on second half results. Given the solid year-to-date results, management affirmed its prior guidance of adjusted EPS in the range of $5.80 to $6.10.


MasterCard-MA reported second quarter revenue rose 13% to a record $3.1 billion with net income up 20% to $1.2 billion and EPS up 24% to $1.10. These strong results were driven by a 9% increase in both gross dollar volume and purchase volume with adjusted gross dollar volume of $1.3 trillion. Cross-border volume jumped 14% and switched transactions increased 17% to 16 billion during the quarter. Acquisitions, primarily Vocalink, contributed 2% to growth. As of quarter end, the company’s customers had issued 2.4 billion MasterCard and Maestro-branded cards. Free cash flow declined 5% to $1.9 billion during the first half of the year due primarily to higher capital expenditures.  During the first half, the company paid $474 million in dividends and repurchased $1.9 billion of is own shares, including 8 million shares repurchased for $931 million in the second quarter at an average price of $116.38 per share. Subsequent to quarter end through July 24, the company repurchased an additional 1.8 million shares for $226 million at an average price of $125.55 per share, which leaves $2.9 billion remaining available for future share repurchases under the current repurchase authorization. MasterCard ended the quarter with nearly $7 billion in cash and investments and $5.3 billion of long-term debt on its balance sheet. For the full 2017 year, management expects constant currency revenues to grow at a low double-digit rate with expenses increasing at a high single-digit rate as underlying profit margins expand. The Vocalink acquisition is expected to be $.05-$.06 per share dilutive in 2017. Consumer confidence around the world appears to be improving with steady growth seen in the U.S. amid low unemployment and low interest rates. Europe is expecting 2% GDP growth this year with consumer confidence high especially in Germany and Spain. Despite Brexit, U.K. sales have increased 5%, and Asia is seeing strong growth especially in India. Mexico continues to report solid growth with consumer and business confidence improving in Brazil.


Automatic Data Processing-ADP reported fourth quarter revenues rose 6% to $3.1 billion with net income down 6% to $265.8 million and EPS down 5% to $.59. Fourth quarter earnings were impacted by a contraction in margins as the company is investing in product, sales and service including dual operation costs related to the service alignment initiative. Client retention improved 60 basis points during the quarter, but declined 50 basis points for the full year to 90%.  For the full fiscal 2017 year, revenues rose 6% to $12.4 billion with net income up 16% to $1.7 billion and EPS up 18.5% to $3.85. Worldwide new business bookings declined a disappointing 5% during the year to $1.65 billion due to uncertainty coming from Washington around healthcare reform and tough comparisons with the prior year bookings. Return on shareholders’ equity for the year was an impressive 43.6%. Free cash flow increased 9% during the year to $1.9 billion. During the year, ADP paid $995 million in dividends and repurchased $1.3 billion of its own shares. Management’s outlook for fiscal 2018 is for revenue growth of 5% to 6%, which assumes renewed growth in worldwide new business bookings of 5% to 7% from clients in 110 countries around the world.  ADP expects reported EPS to decline 1% to 3% with adjusted EPS expected to increase 2% to 4%. The earnings growth forecast assume an adjusted effective tax rate increase of 210 basis points to 33% and an adjusted EBIT margin declined of 25 to 50 basis points for the full year, as the company continues invest in its Employer Services segment. Interest on funds held for clients is expected to increase 11% due to anticipated growth in average client funds balances and a higher average yield earned on these balances.


Wednesday, July 26, 2017


F5 Networks-FFIV reported third fiscal quarter revenues increased 4% to $518 million with net income up 6.4% to $97,662 and EPS up 11% to $1.52 on fewer shares outstanding. Third quarter revenues fell shy of the company’s goal of $520 to $530 million due to slower activity in EMEA and Japan along with a “pause” in activity as customers evaluate how a long-term cloud strategy may impact their application deployment architectures. According to Francois Locoh-Donou, F5’s new president and CEO, where customers have made decisions around their cloud strategy, F5 Networks “has become a critical partner in providing consistent application services and security across environments.” Product sales of $235 million increased 2% year-over-year while Service revenue increased 7% to $283 million. During the quarter, the company repurchased 1.2 million shares for $150 million at an average cost per share of $129.37. Under the current share repurchase authorization $324 million remains. Year-to-date, F5 Networks generated nearly $500 million in free cash flow. F5 repurchased $450 million of its shares during the first three quarters of 2017. The company ended the quarter with more than $1.2 billion in cash and investments and no long-term debt on its weather-resistant balance sheet. Reacceleration of product revenue is management’s top priority. To that end, several new products were recently introduced to improve F5’s position in enabling multi-cloud deployments. These new products include Application Connector 1.0 for connecting public and private cloud application infrastructures, support for BIG-IP in the Google Cloud Platform, and Container Connector and Application Services Proxy for microservices environments. Looking ahead to the fourth quarter ending September 30, the company has set a revenue goal of $530 million to $540 million, up 1% to 3% from last year’s fourth quarter, with an EPS target of $1.64 to $1.67, flat to up 2% from last year.


Westwood Holdings-WHG reported second quarter revenues rose 9% to $33.8 million with net income jumping 35% to $7.8 million and EPS up 20% to $.83 as compensation costs were well managed.   Revenues rose primarily related to higher average assets under management (AUM) which totaled $22.6 billion as of quarter end. AUM from global and emerging markets strategies reached a record $5.1 billion during the quarter on the five-year anniversary of this unit. Free cash flow declined 10% during the first half of the year to $26.6 million with Westwood paying $11.7 million in dividends during the past six months. The dividend currently yields a hefty 4.25% as the company returns most of its free cash flow to shareholders. Westwood ended the quarter with a debt-free balance sheet and more than $88 million in cash and investments, representing nearly $10 per share in cash. Westwood celebrated its 15th year as a public company in July with its market cap rising more than 10-fold over that time period as the company has increased its dividend each year for 15 years, maintained a strong balance sheet and generated strong free cash flows.


Express Scripts-ESRX reported that revenues inched ahead by .5% in the second quarter to $25.3 billion with net income up 11% to $801.8 million and EPS jumping a healthy 21% to $1.37 on lower shares outstanding. Adjusted claims were 350 million, flat with the prior year period. EBITDA per adjusted claim increased 1% to $5.21. The company’s core PBM business, excluding Anthem and transitioning clients, had EBITDA per adjusted claim growth of 5.8%. While Anthem has not provided formal written notice that it does not intend to renew its contract with Express Scripts, management believes it is unlikely its contract with Anthem will be extended with litigation ongoing. Anthem revenues comprised 19% of revenues in the second quarter and Anthem EBITDA was 33% of second quarter EBITDA. Express Scripts is developing a multi-year enterprise-wide initiative to transform their organization by the end of 2021 which is estimated to cost about $600 million to $650 million and deliver cumulative savings of nearly $1.2 billion by 2021. This initiative is expected to help the company achieve its targeted core PBM compounded annual EBITDA growth rate from 2017-2020 of 2% to 4%.   During the first half of the year, Express Scripts’ free cash flow increased 92% to nearly $2 billion. The company used the free cash flow to repurchase $2 billion of its own shares, including 18.5 million shares repurchased in the second quarter for $1.2 billion at an average price of $64.87 per share. Due to the loss of a few state contracts, Express Scripts lowered its expected 2018 retention rate to a range of 94% to 96%. The company raised its adjusted 2017 EPS outlook to $6.95 to $7.05, representing 9% to 10% growth with total adjusted claims expected in the range of 1,385 million to 1,415 million. Net cash flow from operations is expected in the range of $4.7 to $5.2 billion for the full year 2017. This represents a 13% cash flow yield based on the company’s current market capitalization.


Baxter International-BAX reported second quarter sales of $2.6 billion, an increase of 1% from last year, with earnings and EPS falling 78% to $265 million and $0.48, respectively. Excluding last year’s $2.08 per share gain related to the spin-off of Baxalta along with other special items, adjusted EPS from continuing operations increased a healthy 37% to $0.63. A 1.40%  increase in adjusted gross margins contributed to the adjusted earnings’ gain. Favorable pricing and product mix, manufacturing efficiencies and benefits from Baxter’s ongoing business transformation initiative boosted Baxter’s adjusted gross margins to 45.2%. Domestic sales were $1.1 billion, up 4%, while international sales were $1.5 billion, down 2% on a reported basis and up 1% on a constant currency basis. Global sales for Hospital Products totaled $1.6 billion in the second quarter, increasing 1% on continued strength in Baxter’s U.S. fluid systems business, favorable demand for parenteral nutrition therapies and pre-mixed injectable pharmaceuticals, as well as for select anesthesia and critical care products. Renal sales totaled $968 million, flat on a GAAP basis and up 3% on an operational basis. Operational growth in the quarter was driven by increased sales for in-center hemodialysis (HD) products in the U.S., international acute renal care sales and global sales of peritoneal dialysis (PD) therapies. Year-to-date free cash flow was $488 million, up $400 million from last year on strong operational cash flow, lower capital expenditures and management’s focus on driving working capital efficiencies. Given the strong year-to-date performance, Baxter raised its guidance with sales now expected to grow 3% with adjusted EPS from continuing operations in the $2.34 to $2.40 range. This guidance assumes the imminent closure of the company’s proposed acquisition of Claris Injectables and a flat share count. For the full year, Baxter expects to generate $1.8 billion in cash flow from operations and $1.1 billion in free cash flow. As a result of Baxter’s ongoing business transformation efforts designed to accelerate performance, the company increased its long-range projections. Baxter expects sales to grow about 4% on a compounded annual basis from 2016 to 2020 and now anticipates an adjusted operating margin in 2020 of about 20%, compared to previous guidance of 17% to 18%. The company anticipates 2020 adjusted EPS of $3.25 to $3.40 per share. Baxter also increased its cash flow expectations for 2020 and now anticipates operating cash flow of approximately $2.65 billion. Capital expenditures are expected to total $650 million in 2020, resulting in free cash flow generation of approximately $2 billion, an increase of $250 million versus prior guidance. “Baxter’s increased financial outlook and enhanced free cash flow generation provide the flexibility to invest in the business both organically and inorganically while also returning meaningful value to shareholders through dividends and share repurchases,” said Jay Saccaro, executive vice president and chief financial officer.

Tuesday, July 25, 2017


Canadian National Railway-CNI delivered strong second quarter results with revenues powering ahead 17% to a quarterly record of C$3.3 billion, net earnings rising 20% to C$1 billion and EPS jumping 24% to C$1.36. By market segment, revenues increased 33% for both metals & minerals and coal, 23% for grain & fertilizers, 20% for automotive, 17% for intermodal, 12% for petroleum & chemicals and 6% for forest products. Revenue increases were fueled by higher volumes across several sectors, such as Canadian grain and fertilizers, overseas intermodal traffic, frac sand, coal and petroleum coke exports, crude oil and finished vehicles. Also contributing to increased revenues were higher fuel surcharge rates and freight rate increases. Carloadings for the quarter increased by 14% to 1.4 million. Revenue ton-miles (RTMs), measuring the relative weight and distance of rail freight transported by CNI, increased by 18% year-over-year. Rail freight revenue per RTM decreased by 1% over the year-earlier period, mainly due to an increase in the average length of haul. Operating expenses for the second quarter increased by 18% to C$1.8 billion, thanks, in large part, to higher fuel costs. During the quarter, Canadian National generated C$811 million in free cash flow, up 39% from last year’s second quarter, powered by higher cash earnings and favorable changes in working capital. CNI returned C$831 million to shareholders during the second quarter through dividend payments of C$310 million and share repurchases of C$521 million, for an average cost per share of C$99.38. As of 6/30/2017, the company had 19 million shares available for repurchase under the current authorization. Management continues to see growth across a range of commodities, particularly in intermodal traffic, frac sand, Canadian grain, coal exports and finished vehicles, as well as volume weakness in U.S. thermal coal shipments to domestic markets. Looking ahead, management expects to see growth in volumes of crude oil and petroleum coke, and lower volumes for U.S. grain given the difficult year-over-year comps. North American industrial production is expected to increase by about 2%. Given management’s expectation for the economy, the strong year-to-date performance along with challenging second half comps and headwinds from the strengthening Canadian dollar, CNI expects to deliver 2017 EPS in the range of C$4.95 to C$5.10, up 8% to 11% from 2016.


T. Rowe Price-TROW reported second quarter net revenues rose 12% to $1.2 billion with net income up 84% to $373.9 million and EPS up 90% to $1.50. Last year’s results included a nonrecurring charge of $100.7 million related to the Dell appraisal rights matter, which reduced EPS by $.39. Excluding this charge, net earnings would still have increased a strong 23% with EPS charging 27% higher. Investment advisory fees increased 13% during the quarter as ending assets under management (AUM) increased 16% to $903.6 billion. The $42 billion increase in AUM was due to $3.7 billion in net cash inflows and $38.3 billion in net market appreciation during the quarter. The firm’s net cash flows by asset classes were $5.1 billion into bond, money market and stable value assets offset by a $1.4 billion reduction in stock and blended asset classes. Net cash flows into the firm’s targeted retirement portfolios were $3.1 billion with $213.8 billion held in the target date retirement portfolios as of quarter end. T. Rowe Price continues to maintain a debt-free balance sheet with ample liquidity including $3.2 billion in cash and sponsored investment holdings. During the first half of the year, the company repurchased 6.5 million shares, or 2.6% of its outstanding shares, including 1.9 million shares repurchased for $130.7 million in the second quarter at an average price of $68.79 per share. William J. Stromberg, the company's president and chief executive officer, commented: "U.S.stocks rose broadly in the second quarter of 2017 with many major indexes reaching all-time highs. International stocks outperformed U.S.shares, aided by strengthening currencies relative to the U.S.dollar. Fixed income returns were also positive with healthy credit conditions in the U.S. and abroad.” 


Biogen-BIIB reported second quarter revenues rose 6% to $3.1 billion with net income declining 18% to $862 million and EPS down 15% to $4.07. Excluding the hemophilia revenues that were spun-off as Bioverativ-BIVV, Biogen’s revenues rose a healthy 15%, driven by strength in Multiple Sclerosis (MS) revenues, including a 13% increase in TECFIDERA sales to $1.1 billion during the second quarter. Additionally, SPINRAZA revenues grew substantially to $203 million during the quarter with SPINRAZA approved in Europe, Japan and Canada for spinal muscular atrophy. Earnings were impacted by a $120 million charge related to the acquisition of a Phase-3 ready stroke asset from Remedy Pharmaceuticals and a $360 million payment related to an exclusive license agreement with Bristol-Myers Squibb for Phase-2 anti-tau antibody with potential in Alzheimer’s disease and progressive supranuclear palsy. During the second quarter, Biogen repurchased approximately 2.9 million shares of its common stock for $782 million at an average price of about $269.65 per share. The company ended the quarter with $5.5 billion of cash and investments, with about 80% of the cash held outside the U.S., and $6.5 billion in long-term debt. Biogen’s new capital allocation focus is to invest in building its pipeline through increased business development activity, but also recognizes the value of opportunistically returning excess cash to shareholders through share repurchases. Biogen increased its full year 2017 revenue guidance to $11.5 to $11.8 billion related to faster than anticipated adoption of SPINRAZA in the U.S. with the EPS range lowered to $17.05 to $17.65, reflecting the Remedy Pharmaceutical charge and the first quarter impairment charge related to the settlement of a license agreement with Forward Pharma.

 


United Technologies-UTX delivered solid second quarter results with global sales increasing nearly 3% to $15.3 billion and EPS growing 5% to $1.80 while net income from continuing operations was flat at $1.5 billion. Excluding restructuring and other items, EPS increased 2%. Management was encouraged by the macro economic environment although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 1% to $3.1 billion, lifted by a 5% gain in service sales. New equipment orders at Otis were flat on a 6% increase in North America and 3% increase in China, offset by a 14% decline in orders from Europe. Climate, Controls and Security sales increased 6% to $4.7 billion on solid sales growth in commercial refrigeration and North American residential HVAC. Organic equipment orders were up 11% with operating margins down 2% due to an unfavorable mix and pricing pressure. Pratt & Whitney sales rose 7% to $4 billion on strength in the military engines which were up 30%. Aerospace Systems sales decreased 2% to $3.6 billion, boosted by a 7% rise in the commercial aftermarket, offset by an 8% decline in commercial. United Technologies generated $2.1 billion in operating cash flow and $1.7 billion in free cash flow, representing 118% of net income. During the second quarter, the company invested $446 million in capital expenditures, up 23% year over year, as the company continues to focus on new materials and manufacturing processes. The company paid $1 billion in dividends and repurchased $1.4 billion of its own shares during the first six months of the year. Management maintains its commitment to the $3.5 billion in repurchases planned for the full year and reiterated its $1 billion to $2 billion placeholder for opportunistic M&A during 2017. Total 2017 sales are expected in the $58.5 billion to $59.5 billion range, up from the first quarter projection of $57.5 billion to $59 billion. Free cash flow is expected to be 90 to 100 percent of net income with adjusted EPS between $6.45 to $6.60, a $.15 increase on the lower end over previous guidance of $6.30.


Wabtec-WAB reported second quarter revenues rose 29% to $932.3 million with net income down 20% to $72 million and EPS down 25% to $.75. These results reflect the acquisition of Faiveley which contributed to an 80% increase in Transit sales to $587.4 million. Freight sales declined 13% during the quarter to $344.8 million due to lower revenues from freight car and locomotive components and a slower than expected ramp up of certain projects. Net earnings were negatively impacted by restructuring and transaction expenses related to the Faiveley integration and on-going cost-reduction activities. Excluding theses expenses, the company’s operating margin was 13.2% which was relatively stable with its adjusted operating margin last year. Net interest expense jumped substantially, reflecting a higher debt balance of $2 billion due mainly to the Faiveley acquisition. During the quarter, the company’s total multi-year backlog increased 10% compared to the first quarter to a record $4.5 billion with significant projects in global markets. Book to bill was 1.4, a positive sign for future growth. In Freight, backlog has now increased for three consecutive quarters with demand appearing stable in key markets. New orders included more than $350 million for Transit projects in Europe and Australia and more than $60 million for train control and signaling projects in the U.S. During the quarter, Wabtec acquired Thermal Transfer, a manufacturer of heat exchanges for industrial markets, with sales of about $25 million and Semvac, a manufacturer of sanitation systems for locomotives and transit vehicles with sales of about $15 million. While Wabtec expects adjusted operating margin to expand in the fourth quarter to 15%, the company lowered its 2017 full year sales and earnings outlook due to the revised timing of sales and projects, representing about 5% of sales, being pushed out by customers and freight market conditions rebounding slower than expected in a still sluggish aftermarket environment. As a result, 2017 sales are now expected to be about$3.85 billion with adjusted EPS now expected to be between $3.55 and $3.70, excluding expected restructuring and transaction expenses related to Faiveley.


3M-MMM posted solid second quarter results with sales up 2% to $7.8 billion, earnings up 23% to $1.6 billion and EPS up 24% to $2.58. Excluding the $.57 gain on divestitures partially offset by $.24 of investments in accelerated growth programs, productivity and portfolio actions, second quarter EPS increased 8% year-over-year. Organic sales growth during the quarter was strong and broad-based across all five of 3M’s business groups. By business segment, organic local-currency sales increased 8.4% in Electronics and Energy, 3.8% in Industrial, 3.2% in Safety and Graphics, 2.5% in Health Care and 0.7% in Consumer. On a geographic basis, total sales grew 8.3% in Asia Pacific, 2.5% in Latin America/Canada, and 0.5% in the U.S., with sales declining 3.6% in EMEA (Europe, Middle East and Africa). During the second quarter, 3M generated $1.3 billion in free cash flow, up 41% from last year, primarily due to lower cash tax payments. The company returned $1.2 billion to shareholders during the second quarter including $701 million in dividends and $494 million in share repurchases. 3M now expects to repurchase $2 - $3.5 billion of its shares during 2017, versus $2.5 to $4.5 billion previously estimated. Given the strong year-to-date results, the company updated its 2017 guidance. Organic sales growth is now expected in the 3% to 5% range, up from the prior guided range of 2% to 5% with EPS now expected to be $8.80 to $9.05, up from previous guidance of $8.70 to $9.05. Estimates exclude the pending acquisition of Scott Safety and the divestiture of 3M’s electronic monitoring business.

Monday, July 24, 2017


Alphabet-GOOGL reported second quarter revenues rose 21%, or 23% on a constant currency basis, to $26 billion with net income and EPS each declining 28% to $3.5 billion and $5.01, respectively. These results reflect a $2.7 billion fine by the European Commission related to Google’s display and ranking of shopping search results infringing on European competition law. Excluding the substantial fine, net income and EPS would have risen about 28% during the quarter thanks to strong underlying worldwide growth in mobile search and YouTube. Revenue growth was broad based on a geographic basis with strong double-digit growth generated in all major geographic regions. Aggregate paid clicks increased 52% with the aggregate cost per click declining 23% due to the shift to mobile search. Other Bets revenues rose 34% during the quarter to $248 million driven by Nest, Fiber and Verily with the operating loss narrowing to $772 million. Headcount increased 14% over the prior year period to 75,606 Googlers as the company continues to invest in the cloud, YouTube and home hardware. Free cash flow increased 5% during the first half of the year to $12 billion with the company ending the quarter with $95 billion of cash and investments on its fortress balance sheet with 61% of the cash held outside of the U.S. During the first half, Alphabet repurchased $3.7 billion of its own shares. Management is optimistic that artificial intelligence will solve complex problems in medicine and science and sees tremendous growth in Google cloud.

Friday, July 21, 2017


Gentex-GNTX reported second quarter sales rose 5% to $443 million with net income up 2% to $88.5 million and EPS up 3% to $.31. The 5% growth in net sales was driven by a 6% increase in auto-dimming mirror unit shipments despite overall automotive light vehicle production in the company’s primary regions declining by approximately 1%. The gross profit margin declined by 170 basis points to 37.7% in the second quarter due primarily to unfavorable product mix due to a higher percentage of base auto-dimming mirror shipments versus advance feature mirrors shipped in the prior period quarter. Gentex expects product mix to improve in the second half of the year based on orders and the release of new products. Cash flow from operations declined 14% during the first half to $131.2 million due to working capital changes. During the second quarter, the company repurchased 2.2 million of its shares with 3.1 million shares remaining available for repurchase. Management will be aggressive with future share repurchases when short-term issues result in market overreactions in their stock price. During the second quarter, the company paid down $25 million of debt with the company ending the quarter with $814 million in cash and investments and $9 million in long-term debt on its strong balance sheet. Gentex expects 2017 revenue in the range of $1.79 to $1.83 billion with gross margin expected in the 38.5% to 39% range and operating expenses expected in the range of $165 to $170 million. Management continues to expect revenues in 2018 to grow in the 6% to 10% range based on light vehicle production forecasts and current forecasted product mix.



Polaris-PII
reported second quarter revenues rose 21% to $1.4 billion with net income sliding 13% lower to $62 million and EPS down 11% to $.97. Aftermarket segment sales increased substantially due to the acquisition of Transamerican Auto Parts which added $209.1 million to sales in the second quarter. Polaris North American ORV (off-road vehicle) unit retail sales were down by a low-single digits percent as competitive headwinds and weak agricultural and energy headwinds persist, while Indian Motorcycle continue to deliver strong retail sales increasing 17% for the quarter. Earnings were negatively impacted by costs related to the wind down of Victory Motorcycles, certain Transamerican Auto Parts integration and inventory costs and manufacturing network realignment costs. Free cash flow declined 21% during the first half of the year to $182 million with the company paying $73 million in dividends and repurchasing and retiring $66 million of its own shares, including 502,000 shares repurchased in the second quarter for $43.8 million at an average price of $87.25 per share. As of quarter end, the company has 6.7 million shares authorized for future share repurchases. The company increased its full year 2017 sales guidance with adjusted sales expected to increase 12% to 14% with adjusted EPS expected in the range of $4.35 to $4.50, representing 25% to 29% growth over depressed adjusted EPS of $3.48 in 2016.

Thursday, July 20, 2017


Microsoft-MSFT reported fourth quarter revenue rose 13% to $23.3 billion with net income and EPS each more than doubling to $6.5 billion and $.83, respectively, thanks to stronger than expected performance across all business segments and in all three large geographic regions, including the U.S., Germany and Japan.  For the full fiscal 2017 year, revenues rose 5% to $90 billion with net income up 26% to $21.2 billion and EPS up 29% to $2.71. Innovation across the cloud platforms drove the strong results with commercial cloud annualized revenues exceeding an $18.9 billion run rate and on track to meet the goal of $20 billion in annualized revenues in fiscal 2018. Return on shareholders’ equity was an impressive 29% for the year. Free cash flow increased 26% during the year to $31.4 billion thanks to the higher earnings and favorable working capital management. During the year, the company repurchased $11.8 billion of its shares, including $1.6 billion in the fourth quarter, and paid $11.8 billion in dividends.  During the year, Microsoft spent $25.9 billion on acquisitions, including LinkedIn which contributed $2.3 billion to revenues while incurring an operating loss of $948 million.  As of year end, Microsoft held $133 billion in cash and investments and $76 billion in long-term debt on its balance sheet. Key trends for fiscal 2018 should continue to reflect strong commercial demand as companies continue to transition to the cloud. Gross margin and operating margin is expected to contract by 1% due in part to amortization charges and incremental investments related to LinkedIn.


Genuine Parts-GPC reported second quarter sales motored ahead 5% to $4.1 billion, a new record.  Net income for the second quarter dipped 1% to $190 million with EPS increasing 1% to $1.29, on fewer shares outstanding. Management was encouraged by the steady and consistent year-to-date sales growth in each of the company’s four distribution businesses, with the strongest growth in the Industrial and Electrical segments. By segment, Automotive Group sales increased 4% to $2.2 billion, including a 1.5% comparable sales increase, driven by NAPA’s customer loyalty program which now has 5 million members and management’s “Retail Impact Initiative.”Despite the “hysteria” about the impact of online retailing on NAPA’s do-it-yourself auto parts distribution business, management remains confident about the future of its auto parts distribution business given the increase in both basket size and number of transactions in its refurbished stores, now expected to number 500 by year’s end, up from 450 last year.  During the quarter, the automotive group made several acquisitions which are expected to add $100 million to GPC’s annual revenues. Sales at GPC’s Industrial segment, Motion Industries, revved up 7% to $1.3 billion, powered by a 5% comparable sales increase. Sales growth was broad-based across GPC’s industrial market, product and customer base, fueled by strength in the oil patch. Office Products Group sales increased 5% to $504 million despite a 4% decrease in comparable sales. Continued declines in tradition office supply product sales were more than offset by Facility, Breakroom Supplies and Safety sales growth from acquisitions. GPC’s Electrical Group grew 11% to $205 million, powered by the Empire Wire acquisition. Net operating margins dipped 50 basis points to 7.2%, compressed by increases in labor and freight costs, by GPC’s global digital initiative and IT investments. Year-to-date, the company generated $291 million in free cash flow, down 39% year-over-year, squeezed by working capital needs, specifically a 9% increase in inventories which were temporarily bloated from acquisitions. Genuine Parts’ balance sheet is a key company strength with the flexibility and capacity to support future growth. Year-to-date, Genuine Parts returned $351 million to shareholders through share repurchases of $154 million and dividend payments of $197 million. 2017 marks the 61st consecutive year of dividend increases for Genuine Parts. The $2.70 dividend is 57% of EPS and currently yields 3%. Looking ahead to the full year, given that management had anticipated being further along in its cost saving initiatives at quarter’s end, full year EPS guidance was revised to $4.70 to $4.75 from prior guidance of $4.75 to $4.85. Second half EPS are expected to increase 4% to 6% bringing the total full year EPS growth to 2.5% to 3.5%. Free cash flow is expected in the $750 million to $810 million range. Prior guidance for a year-over-year sales increase of 3% to 4% remains unchanged. 

Wednesday, July 19, 2017


Qualcomm-QCOM reported third quarter revenues declined 11% to $5.4 billion with net income and EPS each down 40% to $866 million and $.58, respectively. The third quarter results included a reduction in operating cash flow due to a $940 million payment to BlackBerry and a $927 million payment related to the Korea Free Trade Commission (KFTC) fine. In addition, results were negatively impacted as a result of actions taken by Apple’s contract manufacturers, who did not fully report and did not pay royalties due on sales of Apple products, as well as the previously disclosed dispute with another licensee, who did not report or pay royalties due in the third quarter of fiscal 2017. With leading technologies and the pending $38 billion acquisition of NXP which is expected to close by the end of 2017, management believes they are well positioned to address a larger set of growth opportunities ahead than at any other time in their history. At the end of the quarter, Qualcomm held $37.8 billion in cash and marketable securities and $19 billion in long-term debt. This includes $11.0 billion of unsecured floating and fixed-rate notes issued in May, which are intended to be used to finance, in part, the acquisition of NXP. For the 9 months ending June 25th, Qualcomm’s free cash flow declined 62% to $1.8 billion due to lower earnings with the company paying out $2.4 billion in dividends and repurchasing $1 billion of its own shares. The company has $2 billion remaining authorized for future share repurchases. Cumulatively, Qualcomm has returned $57.5 billion to shareholders through dividends and share repurchases. Qualcomm’s outlook for the fourth quarter is abnormally wide with revenues expected in the range of $5.4 billion to $6.2 billion, representing a decline of 13% to flat with EPS expected in the range of $.55 - $.65, representing a decline of 39% to 49% with the decline in earnings primarily related to disputes in the high margin licensing business segment


Alphabet-GOOGL announced that  X, its moonshot factory, has released Glass Enterprise Edition after two years in limited production. Glass is a very small, lightweight wearable computer with a transparent display that brings information into the wearer’s line of sight. In a work setting, Glass can be clipped onto glasses or industry frames like safety goggles providing hands-free on-the-job content. Workers in many fields--manufacturing, logistics, field services and healthcare--find it useful to consult a wearable device for information and other resources while their hands are busy. Read more. 

Tuesday, July 18, 2017


Johnson & Johnson-JNJ reported second quarter revenues rose 2% to $18.8 billion with net income down 4% to $3.8 billion and EPS down 2% to $1.40. On an adjusted basis excluding special items and intangible amortization, net earnings rose 3% with EPS up a solid 5%. Worldwide Consumer sales increased 1.7% during the quarter to $3.5 billion with primary contributors to growth including Neutrogena beauty products, domestic over-the-counter products and international anti-smoking aids. Worldwide Pharmaceutical sales dipped .2% during the quarter to $8.6 billion impacted by divestitures. On an operational basis, sales increased .5% driven by new products and the strength of core products. The pharmaceutical pipeline continued its strong momentum with the approval of TREMFYA subsequent to quarter end for the treatment of adults living with moderate to severe plaque psoriasis. During the quarter, JNJ completed the acquisition of Actelion, a leading biopharmaceutical company, for a total of $30 billion in cash which establishes a new therapeutic area as well as another engine for growth for JNJ. Worldwide Medical Devices sales increased 4.9% during the quarter to $6.7 billion, which included the first full quarter of the recently completed acquisition of Abbott Medical Optics. Medical Devices growth was driven by electrophysiology products in the cardiovascular business, Acuvue contact lenses in the vision care business and advanced surgery products. The company ended the quarter with $13 billion in cash and $35 billion in debt related to recent acquisitions. JNJ has completed their previously announced $10 billion share repurchase program. Sales growth is expected to accelerate in the second half of the year due to the recent acquisitions and easier comparisons for the pharmaceutical business. JNJ raised their sales and earnings outlook for the full 2017 year and now expects to report sales of $75.8 billion to $76.1 billion, reflecting 5.4% to 5.9% growth, with EPS expected in the range of $7.12 t $7.22, reflecting 6%-7% growth.


Monday, July 17, 2017


Ross Stores-ROST announces the recent opening of 21 Ross Dress for Less® ("Ross") and seven dd's DISCOUNTS® stores across 15 different states in June and July. These new locations are part of the Company's plans to add approximately 70 Ross and 20 dd's locations in 2017. "With this opening group, we continued to expand Ross and dd's in both new and existing markets. Ross grew in its newest market – the Midwest – as well as existing markets, including California, Texas, and Florida. And in June, dd's opened its 200th location and expanded into its newest state of Pennsylvania," said Jim Fassio, President and Chief Development Officer. "Looking ahead, we remain confident in our expansion plans and continue to see plenty of opportunity to grow across all of our markets. We continue to believe that over the long-term, Ross can grow to 2,000 locations and dd's can become a chain of 500 stores."

 Thursday, July 13, 2017


Paychex-PAYX announced that its board of directors approved a $0.04 increase in the company’s regular quarterly dividend, an increase of nine percent. The dividend will go from $0.46 per share to $0.50 per share and is payable on August 24, 2017 to shareholders of record on August 1, 2017. “The dividend increase continues the company’s history of providing outstanding shareholder value,” said Martin Mucci, Paychex president and CEO. “As we begin a new fiscal year, we continue to invest in strategic growth opportunities and our employees. These investments, combined with our financial strength, enable us to expand the returns we deliver to our shareholders.” During the fiscal year ended May 31, 2017, Paychex returned more than $662 million in dividends, or 81% of net income, to shareholders.


T. Rowe Price Group-TROW reported preliminary month-end assets under management of $904 billion as of June 30, 2017. Client transfers from mutual funds to other portfolios were $4.2 billion and $7.6 billion for the month- and quarter-ended June 30, 2017, respectively.

Wednesday, July 12, 2017


Walgreens Boots Alliance, Inc-WBA announced that its board of directors has declared a quarterly dividend of 40 cents per share, an increase of 6.7 percent. The increased dividend is payable 12 September 2017 to stockholders of record 18 August 2017, and raises the annual rate from $1.50 per share to $1.60 per share. This marks the 42nd consecutive year that Walgreens Boots Alliance and its predecessor company, Walgreen Co., have raised the dividend.


Fastenal-FAST reported second quarter revenues rose 11% to $1.1 billion with net income and EPS each hammering up 13% gains to $148.9 million and $.52, respectively. The increase in net sales returned the company to double-digit sales growth and was driven by higher unit sales from an improvement in underlying market demand, growth in the industrial vending business and growth in new and existing Onsite locations as Fastenal gained market share. Daily sales of fastener products, representing 36% of sales, grew 7.9% during the quarter while the non-fastener products, representing 64% of sales, jumped 12.2%. Gross profit margin improved 30 basis points to 49.8% during the quarter due to changes in product and customer mix and progress in supply chain initiatives. Good control over operating costs resulted in incremental margins topping 25%.  Free cash flow increased 43% during the first half of the year to $236 million due primarily to the improvement in net earnings and a reduction in capital expenditure. For the full year, the outlook for capital expenditures was increased to $127 million from previous guidance of $119 million due to higher anticipated spending on supply chain and information technology. During the first half, Fastenal paid $185 million in dividends and repurchased $57 million of its own shares, including 1.3 million shares purchased in the second quarter at an average price of $43.62 per share. The board of directors announced a new 5 million share repurchase program. The company’s conservative balance sheet provides management with the financial flexibility to invest in the business, increase the dividend and use excess cash to repurchase shares.  With the manufacturing economy improving, the company’s end markets remain positive with sales accelerating throughout the second quarter. With Fastenal seeing success in all of their growth drivers, management appeared upbeat about prospects for the remainder of the year.

Tuesday, July 11, 2017


PepsiCo-PEP reported second quarter revenues rose 2% to $15.7 billion with net income bubbling up 5% to $2.1 billion and EPS up 6% to $1.45.  On an organic basis, revenues rose 3% with core constant currency EPS growth of 13%. These results included a $.06 favorable impact on EPS related to a gain associated with the sale of a minority interest in Britvic, plc. The company plans to reinvest this gain. PepsiCo’s second quarter results were solid amid pockets of macroeconomic challenges, especially in the Mideast, and an increasingly changing retail and consumer landscape. On an organic volume basis, beverages were down 2% with food/snacks up 2%. Organic revenue growth was driven by 8% growth in Latin America with operating profit growth led by Frito-Lay North America and improvements in the Europe Sub-Saharan Africa region. Free cash flow during the first half declined 38% to $1.4 billion primarily due to working capital fluctuations. During the first half, PepsiCo paid $2.2 billion in dividends and repurchased $942 million of its own common shares. For the full year, the company expects to generate approximately $10 billion in cash flow from operations, spend $3 billion on capital expenditures and produce $7 billion in free cash flow. The majority of the free cash flow is expected to be returned to shareholders in 2017 via $4.5 billion in dividends and $2 billion in share repurchases. Consistent with its previous guidance, PepsiCo expects organic revenue growth of at least 3% with core constant currency growth of 8% to $5.13 in core 2017 EPS.

Friday, July 7, 2017


Berkshire Hathaway Energy, a subsidiary of Berkshire Hathaway-BRKB, announced it has executed a definitive merger agreement to acquire reorganized Energy Future Holdings, which will ultimately result in the acquisition of Oncor, an energy delivery company serving approximately10 million Texans. The all-cash consideration for reorganized Energy Future Holdings is $9 billion. The transaction is currently expected to be completed in the fourth quarter of 2017. “Oncor is an excellent fit for Berkshire Hathaway, and we are pleased to make another long-term investment in Texas – when we invest in Texas, we invest big!” Buffett said in a statement. “Oncor is a great company with similar values and outstanding assets.”

Qualcomm-QCOM announced that it is filing a complaint with the United States International Trade Commission (ITC) alleging that Apple-AAPL has engaged in the unlawful importation and sale of iPhones that infringe one or more claims of six Qualcomm patents covering key technologies that enable important features and functions in iPhones. Qualcomm is requesting that the ITC institute an investigation into Apple's infringing imports and ultimately issue a Limited Exclusion Order (LEO) to bar importation of those iPhones and other products into the United States to stop Apple's unlawful and unfair use of Qualcomm's technology. The Company is seeking the LEO against iPhones that use cellular baseband processors other than those supplied by Qualcomm's affiliates. Additionally, Qualcomm is seeking a Cease and Desist Order barring further sales of infringing Apple products that have already been imported and to halt the marketing, advertising, demonstration, warehousing of inventory for distribution and use of those imported products in the United States. "Qualcomm's inventions are at the heart of every iPhone and extend well beyond modem technologies or cellular standards," said Don Rosenberg, executive vice president and general counsel of Qualcomm. "The patents we are asserting represent six important technologies, out of a portfolio of thousands, and each is vital to iPhone functions.  Apple continues to use Qualcomm's technology while refusing to pay for it. These lawsuits seek to stop Apple's infringement of six of our patented technologies." Qualcomm expects that the ITC investigation will commence in August and that the case will be tried next year.

Friday, June 30, 2017

On June 28, 2017, Bank of America Corporation announced that it plans to increase its quarterly dividend to $0.12 per common share. When this occurs, Berkshire Hathaway-BRKB will exercise its warrants to acquire 700,000,000 shares of Bank of America Common Stock at the exercise price of $7.142857 per common share. Pursuant to the terms of the warrants, Berkshire expects to use its $5 billion of Bank of America Corporation 6% Preferred Stock that it currently owns as the consideration to acquire the common shares. Berkshire will become Bank of America’s largest shareholder, owning about 7% of the shares outstanding. Rub-a-dub-dub, the idea to invest in Bank of America in 2011 came to Warren Buffett while he was literally in the bathtub. The result has been a bubbly $12 billion gain for Berkshire along with about $1.7 billion in dividends. As Buffett joked at the recent annual meeting, “I spent a lot of time in the bathtub since and nothing has come to me. Clearly, I either need a new bathtub or we have to get into a different kind of market. “

Thursday, June 29, 2017

Nike-NKE reported fourth quarter revenues rose 5% to $8.7 billion with net income up 19% to $1 billion and EPS up 22% to $.60. For the full fiscal 2017 year, revenues rose 6% to $34.4 billion with net income up 13% to $4.2 billion and EPS up 16% to $2.51. Return on shareholders’ equity for the year was a hefty 34.2%.  International geographies and the Direct-to-Consumer (DTC) businesses globally led strong revenue growth in the fourth quarter and full year. International sales account for more than 50% of total revenues with international growth led by 17% constant currency growth from Greater China, 14% growth from Emerging Markets and 11% growth from Western Europe during fiscal 2017. Total Nike Footwear revenues rose 8% for the year on a constant currency basis to $21 billion with apparel up 9% to $9.7 billion.  The strong earnings growth during fiscal 2017 was driven by solid revenue growth, a lower tax rate and a lower average share count which was slightly offset by a lower gross margin. Inventories at the end of the year were up 4% to $5.1 billion as a 3% decrease in Nike Brand wholesale unit inventories was more than offset by increases in average product cost per unit and growth in the DTC businesses. The company’s cash and investments increased $722 million during the year to $6.2 billion on the company’s muscular balance sheet as of year end. During the fourth quarter, Nike repurchased 14.9 million shares for approximately $820 million at an average price of $55.03 per share as part of the four-year $12 billion share repurchase program approved by the Board in 2015. Since then, the company has repurchased 79.8 million shares for approximately $4.4 billion at an average price of about $55.13 per share. Nike is in the process of launching a new pilot program in fiscal 2018 with Amazon which will combine Amazon’s convenience with the strength of the Nike brand. For fiscal 2018, management expects revenues on a constant currency basis to increase in the mid-to-high-single digit range with growth expected across all geographies with constant currency gross margins expected to expand 30-50 basis points, leading to double-digit growth in operating income. However, $700 million in foreign currency headwinds will result in reported revenues growing in the mid-single digit range with modest gross margin contraction.

Walgreens Boots Alliance-WBA reported third quarter revenues rose 2% to $30.1 billion with net income up 5% to $1.2 billion and EPS up 6% to $1.07. Retail Pharmacy USA sales increased 6% to $22.5 billion during the quarter with comparable sales up 4%. Pharmacy sales, which accounted for 69.9% of the division’s sales, increased 10%, driven by 6% comparable store sales growth, due to higher prescription volumes including mail and central specialty following the formation of strategic partnerships which brought more patients to the U.S. pharmacies. The division filled 255.2 million prescriptions, an increase of 8.5% over the prior year period. The division’s retail prescription market share increased 110 basis points over the year ago quarter to a record 20.5%, the highest reported market share in the U.S. Retail Pharmacy International sales decreased 10.3% to $2.8 billion mainly due to currency translation. Pharmaceutical Wholesale sales decreased 7.9% to $5.3 billion mainly due to currency translation with comparable constant currency sales up 3.7%. Walgreens announced a new agreement with Rite Aid under which Walgreens will purchase 2,186 stores, three distribution centers and related inventory from Rite Aid for $5.175 billion in cash. This revised agreement which was prompted by a longer than expected FTC review is smaller than the previous acquisition agreement which has been terminated. Management views the new agreement as more attractive than the original deal and simpler to deliver both operationally and financially. Walgreens expects $400 million per annum in synergies within a few years with the deal expected to be modestly accretive to earnings in the first year after closing as the deal expands Walgreens’ network and population coverage. Due to the significantly lower cost of the deal, Walgreens announced a new $5 billion share buyback program which is in addition to the $1 billion buyback program that was recently completed. Walgreens’ free cash flow increased 1% year-to-date to $4.3 billion with the company paying $1.2 billion in dividends and repurchasing $1.5 billion of its shares through the first nine months of the year. The company raised the lower end of its guidance for fiscal year 2017 by $.08 and now anticipates adjusted EPS in the range of $4.98-$5.08. With respect to potential competition from Amazon, Walgreens said they did not think Amazon would be interested in participating in their space, but if they did, Walgreens would be well prepared for the potential competition and could even partner with Amazon, which might present the company with other growth opportunities. Management believes Mr. Market had an emotional rather than rational reaction to potential competition from Amazon.

Biogen-BIIB will present robust efficacy and safety data from Phase 2 and 3 SPINRAZA® (nusinersen) studies at the Cure SMA 2017 Annual SMA Conference in Orlando, Fl, June 29 – July 2, 2017. The breadth of data presented reinforces the significant and clinically meaningful efficacy of SPINRAZA on the achievement of motor milestones and measures of motor function across a broad range of individuals with spinal muscular atrophy (SMA), as well as on survival endpoints in infantile-onset SMA. “Data presented at the Cure SMA 2017 Annual SMA Conference further demonstrate the significant impact of SPINRAZA and the benefits of early treatment initiation. We are encouraged to see unprecedented motor function gains in infants on permanent ventilation and a continued favorable benefit-risk profile across a broad population including no increase in risk of adverse events in children who have developed scoliosis.” said Wildon Farwell, M.D., M.P.H., senior medical director, Clinical Development, Biogen. “As part of our mission to make a meaningful difference in the lives of those affected by SMA, we continue to collect and evaluate data to provide a deeper understanding of the impact of SPINRAZA across SMA populations and share those results with the SMA community.”

Wednesday, June 28, 2017

Paychex-PAYX reported fourth quarter revenues rose 6% to $798.6 million with net income and EPS each up 10% to $195.3 million and $.54, respectively. For the full year, revenues rose 7% to $3.2 billion, crossing the $3 billion milestone for the first time, with net income and EPS each up 8% to $817.3 million and $2.25, respectively. Return on shareholders’ equity for the year was a sterling 41.8%. As of 5/31/17, Paychex served approximately 605,000 payroll clients, consistent with a year ago. While new business starts are back at pre-recession levels, there were a surprisingly large number of bankruptcies among small business clients. Client retention declined slightly to 81% due primarily to operational changes implemented during the year.   Free cash flow declined 6% during the year to $866.1 million due to working capital fluctuations. The company paid $662.3 million in dividends during the year and repurchased 2.9 million of its own shares for $166.2 million at an average price of $57.31 per share. Paychex ended the fiscal 2017 year with a strong financial position with no long-term debt and $777 million in cash and investments. Management’s outlook for fiscal 2018 is for total revenues and net income each expected to increase 5% with operating margins expanding to 40%.

Tuesday, June 27, 2017

FactSet-FDS reported fiscal third quarter revenues rose 9%, or 6% organically, to $312.1 million with net income down 2% to $65.4 million and EPS up 3% to $1.66. Operating margin declined to 28.1% from 31.1% in the prior year period primarily due to acquisition-related costs. On an adjusted basis, net income and EPS rose 8% and 13%, respectively. Annual Subscription Value (ASV) increased 10%, or 6% organically, to $1.28 billion as of 5/31/17. ASV at any given time represents the forward-looking revenues for the next 12 months from all subscription services currently supplied to clients. During the quarter, the company paid $205.2 million and $20 million in cash, respectively, for BISAM Technologies S.A., a leading provider of portfolio performance and attribution, and Interactive Data Managed Solutions, a managed solutions and portal provider for the global wealth management industry. Client count as of 5/31/17 was 4,629, a net increase of 225 clients, including 117 net new clients from the acquisitions. User count grew 237 to 86,025 in the past three months. Annual client retention was greater than 95% of ASV or 92% when expressed as a percentage of clients. Employee headcount was 8,885, a 5.2% increase on an organic basis. Free cash flow declined 14% during the first nine months to $194 million due to working capital needs. Year-to-date, FactSet has paid $59 million in dividends and repurchased $215 million of its own shares, including 300,000 shares repurchased in the third quarter for $48.3 million at an average price of $161 per share. The company has $288.2 million remaining authorized for future share repurchases which management is committed to buying in the fourth quarter and into fiscal 2018. During the fourth quarter, management expects revenues to be in the range of $321 million to $328 million with EPS expected in the range of $1.67-$1.73. On an adjusted basis, fourth quarter EPS is expected in the range of $1.86-$1.92, representing 12% growth at the midpoint.

The European Commission has fined Alphabet-GOOGL $2.7 billion for breaching EU antitrust rules. The European Commission claims Google has abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service. The company must now end the conduct within 90 days or face penalty payments of up to 5% of the average daily worldwide revenue of Alphabet. Alphabet responded that “Given the evidence, we respectfully disagree with the conclusions announced today. We will review the Commission’s decision in detail as we consider an appeal, and we look forward to continuing to make our case.”

Monday, June 26, 2017

Waymo, the self-driving car unit of Alphabet-GOOGL, has reached an agreement for Avis Budget Group Inc. to manage its fleet of autonomous vehicles. Avis will service and store Waymo’s Chrysler Pacifica minivans in Phoenix.  Waymo will own the vehicles and pay Avis for its service, an arrangement that is set for multiple years but not exclusive. Financial terms of the deal were not released.

Berkshire Hathaway-BRKB has taken a 9.8% stake in Store Capital Corp, a real estate company that invests in single-tenant properties, for $377.1 million. Store plans to use proceeds from the offering to buy properties, repay debt and other purposes.

Thursday, June 22, 2017

Accenture-ACN reported third quarter net revenues rose 5%, or 7% in local currency, to $8.9 billion with net income dropping 26% to $705 million and EPS down 25% to $1.05. The earnings reflect a $510 million, or $.47 per share, pension termination settlement charge. Excluding the charge, operating income rose 5% to $1.38 billion with a 15.5% operating margin consistent with the prior year and EPS rose 8% to $1.52. New bookings for the quarter were $9.8 billion with record consulting bookings of $5.2 billion and outsourcing bookings of $4.6 billion. During the quarter, the company gained significant market share with broad-based growth across most of the business from an industry, geographic and capability standpoint. On a geographic basis, Growth Markets, including Japan and Australia, led the way with strong double-digit growth. Growth in the operating groups was led by Products with 15% growth during the quarter. “The New” digital, cloud and security services generated strong double-digit growth which now approximate 50% of revenues. For the first nine months of the year, Accenture’s free cash flow increased 20% to $2.7 billion with the company paying $1.6 billion in dividends and repurchasing $2 billion of its shares, including 4.9 million shares repurchased in the third quarter for $589 million at an average price of $120.50 per share. Accenture has $3.7 billion authorized for future share repurchases. Accenture also made $1.2 billion in acquisitions year-to-date with its strong balance sheet with $3.4 billion in cash and minimal long-term debt providing the company with financial flexibility to grow the business while returning significant cash to shareholders. For the full year fiscal 2017, Accenture now expects net revenue growth to be in the range of 6% to 7% in local currency compared to previous guidance of 6% to 8% growth. Including the impact of the pension charge, GAAP EPS is now expected in the range of $5.37 to $5.44. Free cash flow is still expected to be in the range of $4.0 to $4.3 billion for the full year.

Berkshire Hathaway-BRKB announced that it has agreed to make an initial investment of C$153,225,739 to acquire 16,044,580 common shares of Home Capital Group Inc.  on a private placement basis, representing an approximate 19.99% equity stake in Home Capital on a post-issuance basis (25% on a pre-issuance basis). Berkshire also agreed to make an additional investment of C$246,774,261 to acquire 23,955,420 Common Shares on a private placement basis, which, together with its initial investment, would represent an approximate 38.39% equity stake in Home Capital. Concurrently with the execution of the Investment Agreement, Home Capital caused Home Trust Company, as borrower, to agree to enter into a new C$2 billion loan facility with a wholly-owned subsidiary of Berkshire, as the agent and initial lender, to be secured against a portfolio of mortgages originated by Home Trust Company.

Wednesday, June 21, 2017

Oracle-ORCL reported fourth quarter revenues rose 3% to $10.9 billion led by a 58% increase in total cloud revenues to $1.4 billion, topping the $1 billion milestone for the first time in a quarter. Net income and EPS each increased 15% during the quarter to $3.2 billion and $.76, respectively. The company continues to experience rapid adoption of the Oracle Cloud led by the 75% growth in their Software as a Service (SaaS) business in the fourth quarter. For the full fiscal 2017 year, revenues rose 3% to $37.7 billion as cloud revenues jumped 60% to $4.6 billion with software license updates and product support up 2% to $19.2 billion. Net income for the year increased 5% to $9.3 billion with EPS up 7% to $2.21. Return on shareholders’ equity for the year was a solid 17.2%.  Free cash flow dipped 3% to $12.1 billion as the company continued to invest in its cloud capital expenditures. In fiscal 2018, cloud capital expenditures should stabilize around $1 billion. During the year, the company paid $2.6 billion in dividends and repurchased a net $1.4 billion of its own shares including 11 million shares in the fourth quarter for $500 million at an average price of $45.45 per share. The cloud hyper-growth is expanding Oracle’s operating margin as SaaS gross margin is expected to expand to close to 80% by year end. Accordingly, management expects EPS growth to accelerate in fiscal 2018 with double-digit EPS growth expected for the full year. AT&T has agreed to migrate thousands of existing Oracle databases to the Oracle Cloud with more big customers expected to do large-scale migrations to the Oracle Cloud in the year ahead.

Monday, June 19, 2017

Stryker-SYK announced a definitive agreement to acquire NOVADAQ Technologies Inc. for $11.75 per share, or $701 million with a net purchase price of $654 million, reflecting net cash of approximately $47 million. NOVADAQ is a leading developer of fluorescence imaging technology that provides surgeons with visualization of blood flow in vessels, and related tissue perfusion in cardiac, cardiovascular, gastrointestinal, plastic, microsurgical, and reconstructive procedures.  NOVADAQ was founded in 2000 and is headquartered in Mississauga, Canada. The transaction is expected to close at the end of the third quarter and is expected to be dilutive to Stryker`s 2017 adjusted net earnings per diluted share by $0.03 - $0.05. There is no change to Stryker`s 2017 estimated adjusted net earnings per diluted share, which is in the range of $6.35 - $6.45. For 2018, this transaction is expected to be neutral to Stryker`s earnings and accretive thereafter.

International Consolidated Airlines Group S.A. (IAG) has signed a memorandum of understanding with Pratt & Whitney for the PurePower Geared Turbofan™ (GTF) engine to power 47 firm Airbus A320neo family aircraft. Pratt & Whitney is a division of United Technologies-UTX.  "Pratt & Whitney appreciates IAG's faith in the GTF engine, which has demonstrated its promised fuel burn savings, emissions, and reduction in noise footprint," said Chris Calio, president, Commercial Engines. "The PurePower GTF engine is a game-changing, break-through technology with more than 200,000 hours of passenger service. There are 67 aircraft with 13 operators flying 250 flights per day to over 100 destinations on four continents." IAG is the parent company of Aer Lingus, British Airways, Iberia and Vueling.

Accenture-ACN is leading a "call to action" and responding with blockchain and biometric technologies to support ID2020, a global public-private partnership dedicated to solving the challenges of identity faced by more than 1.1 billion people around the world. Approximately one-sixth of the world's population cannot participate in cultural, political, economic and social life because they lack the most basic information: documented proof of their existence. Establishing identity is critical to accessing a wide range of activities, including education, healthcare, voting, banking, mobile communications, housing, and family and childcare benefits. The goal of ID2020 is to make digital identity a reality through a technology-forward approach that will leverage secure and well-established systems. Accenture, in partnership with Microsoft-MSFT and Avanade, has developed an identity prototype based on blockchain technology – a type of database system that enables multiple parties to share access to the same data with an extremely high level of confidence and security.

Friday, June 16, 2017

As Walt Disney-DIS celebrates the first year anniversary of the Shanghai Disney theme park, the company reported more than 11 million people have visited the park since it opened with the park  breaking even in its first year which Disney CEO, Bob Iger, called an “extraordinary achievement.”  Half of the park's visitors are from the Shanghai region and the other half are from elsewhere in China.

Thursday, June 15, 2017

NIKE-NKE announced the Consumer Direct Offense, a new company alignment that allows Nike to better serve the consumer personally, at scale. Leveraging the power of digital, Nike will drive growth—by accelerating innovation and product creation, moving even closer to the consumer through Key Cities, and deepening one-to-one connections. Trevor Edwards, President of the NIKE Brand, will drive the Consumer Direct Offense through integrated category, geography, marketplace, product, merchandising, digital, and direct-to-consumer teams. In the new alignment, Nike will drive growth by deeply serving consumers in 12 key cities, across 10 key countries: New York, London, Shanghai, Beijing, Los Angeles, Tokyo, Paris, Berlin, Mexico City, Barcelona, Seoul, and Milan. These key cities and countries are expected to represent over 80 percent of Nike’s projected growth through 2020. Nike’s leadership and organizational changes will streamline and speed up strategic execution. The changes are also expected to result in an overall reduction of approximately 2 percent of the company’s global workforce. “The future of sport will be decided by the company that obsesses the needs of the evolving consumer,” said Mark Parker, NIKE, Inc. Chairman, President, and CEO. “Through the Consumer Direct Offense, we’re getting even more aggressive in the digital marketplace, targeting key markets and delivering product faster than ever.”

Wednesday, June 14, 2017

United Technologies’-UTX Board of Directors declared, effective July 5, 2017, a dividend of 70 cents per outstanding share of common stock, which represents a 6.1 percent increase over the prior quarter's dividend amount.  The dividend will be payable September 10, 2017, to shareowners of record at the close of business August 18. "Today's announcement to increase our dividend reflects our ongoing commitment to remain disciplined in our capital allocation and deliver value to shareowners through our long-term growth strategy" said UTC Chairman and Chief Executive Officer Greg Hayes. UTC has paid cash dividends on its common stock every year since 1936.

The U.S. Food and Drug Administration (FDA) has accepted Bioverativ’s-BIVV Investigational New Drug (IND) application for BIVV001, a novel, investigational Factor VIII therapy designed to potentially extend protection from bleeding episodes via prophylactic once-weekly dosing or longer for patients with hemophilia A. BIVV001 is the only investigational Factor VIII therapy in development that has been designed to overcome the von Willebrand factor ceiling, which is believed to impose a half-life limitation on current Factor VIII therapies. “We are very pleased by the announcement from Bioverativ that clinical enrollment is planned to begin in the latter half of 2017. This represents the second clinical trial involving an XTEN-based product to be initiated this year,” remarked Volker Schellenberger, CEO and President of Amunix. “We look forward to the evaluation of BIVV001 in the clinic and the continued progression of Bioverativ’s hemophilia programs that exploit the advantages offered by the XTEN technology platform.”    

Baxter International-BAX announced an agreement with Dorizoe Lifesciences Limited (Dorizoe), a full-service global contract research and development (R&D) organization, that will facilitate accelerated development of more than 20 generic injectable products—including anti-infectives, oncolytics and cardiovascular medicines. Dorizoe will work with Baxter to perform certain product development activities, and Baxter will hold worldwide manufacturing and commercialization rights. “This partnership extends Baxter’s growing pipeline of generic injectables, further strengthening our portfolio with a broad range of high-quality essential medicines,” said Robert Felicelli, president, Pharmaceuticals, Baxter. “We look forward to working with Dorizoe to bring their highly skilled technical expertise together with Baxter’s manufacturing leadership and hospital channel strength to better serve the needs of patients around the world.” Baxter estimates that the global sterile generic injectables segment is more than $40 billion, with a compound annual growth rate of approximately 10 percent (2010 – 2015). Baxter currently participates in a niche portion of the segment, producing difficult-to-manufacture oncology drugs and standard-dose, ready-to-use premixed injectable products. Baxter recently announced plans to expand its presence in the space with the pending acquisition of Claris Injectables Limited (Claris). The acquisition of Claris, which is expected to close in the second half of 2017, will provide Baxter with a currently marketed portfolio of molecules in anesthesia and analgesics, renal, anti-infectives and critical care in a variety of presentations including bags, vials and ampoules along with a robust pipeline and high-quality manufacturing capabilities. Baxter also recently announced a strategic partnership with ScinoPharm—one of the world’s leading active pharmaceutical ingredient (API) manufacturers—to develop, manufacture and commercialize five generic injectables used in cancer treatment, with an option to add up to 15 additional injectable molecules.

Tuesday, June 13, 2017

The Cheesecake Factory-CAKE updated its outlook for second quarter fiscal 2017 comparable sales. The Company now expects comparable sales at The Cheesecake Factory restaurants for the second quarter of fiscal 2017 to be down approximately 1%. The Company expects this to impact second quarter margins and earnings per share. “We have continued to outperform the casual dining industry quarter to date, with over half of our regions posting positive comparable sales for the period, including key markets of California, Texas and Florida,” said David Overton, Chairman and Chief Executive Officer. “More broadly however, we have seen heightened volatility in week to week sales trends, indicative of uncertainty on the part of many consumers. Specifically, we have seen pockets of softness as we moved through the quarter, notably in the East and Midwest where we also faced unfavorable weather that reduced patio usage.” Overton continued, “We believe The Cheesecake Factory brand is as strong as ever and our underlying operating metrics remain solid. We are managing the business for the long term, continuing to provide delicious and memorable dining experiences for our guests, while executing on our diversified growth drivers and effectively allocating our strong cash flow to position the Company to generate sustained shareholder returns.”  

Wednesday, June 7, 2017

Brown-Forman-BFB reported fourth quarter revenues declined 5% to $694 million with net income down 72% to $144 million and EPS off 71% to $.37. For the full fiscal 2017 year, revenues declined 3% to $3 billion with net income down 37% to $669 million and EPS down 34% to $1.71. These results reflect the impact of acquisitions, divestitures and adverse foreign exchange between fiscal 2016 and 2017. On an underlying basis, the company reported 3% growth in revenues for the full year with operating income up 7% and EPS up 5%. This year’s results translated into the 10th straight year of growth in underlying sales and operating income with underlying operating income growth of 7% approximating the 10-year average of 8% growth. The company’s underlying operating margin of 33% in fiscal 2017 exceeded its 10-year average operating margin of 30% with the return on invested capital (ROIC) of 19% in fiscal 2017 approximating its average 20% ROIC over the last 10 years, demonstrating the company’s historical track record of high-quality and  consistent profitability. Return on shareholders’ equity for fiscal 2017 was a cheery 49%.  The company generated underlying growth in all of its top ten markets in fiscal 2017 with double-digit growth experienced in Mexico, France and Japan. Jack Daniel’s generated solid 3% underlying growth during the year with Woodford Reserve and Old Forrester chugging up strong 20% growth and the tequila brands toasting 12% growth during the year. Free cash flow increased 27% during the year to $527 million. Brown-Forman paid $274 million in dividends during the year and repurchased 11.9 million of its shares for $561 million at an average price of $47 per share. Since fiscal 2013, the company has returned $4.3 billion to shareholders through dividends and share repurchases. Despite a volatile global economy, especially in emerging markets, management’s outlook for fiscal 2018 is for underlying net sales growth of 4% to 5% led by the Jack Daniel’s family of brands, the company’s premium bourbon and tequila brands and helped by new products such as the launch of Jack Daniel’s Tennessee Rye and Slane Irish Whiskey. Underlying operating income growth is expected in the 6% to 8% range with EPS expected in the range of $1.80 to $1.90.

AbbVie-ABBV announced positive top-line results from the Phase 3 SELECT-NEXT clinical trial evaluating upadacitinib (ABT-494), an investigational oral JAK1-selective inhibitor, in patients with moderate to severe rheumatoid arthritis (RA) who did not adequately respond to treatment with conventional synthetic DMARDs (csDMARDs). Results showed that after 12 weeks of treatment, both doses of upadacitinib (15 mg and 30 mg) met the study's primary endpoints of ACR20 and low disease activity. Key secondary endpoints were also achieved and included ACR50, ACR70 and clinical remission. "We are excited by these promising results for upadacitinib. Selective inhibition of the JAK1 pathway may offer a novel treatment for rheumatoid arthritis patients who do not adequately respond to conventional therapies," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "We are especially encouraged by the results on the more stringent measures of efficacy, such as ACR70, low disease activity and clinical remission. We look forward to seeing the full results from our Phase 3 program. AbbVie's longstanding leadership in the treatment of immune-mediated diseases provides an opportunity to build upon our understanding and develop innovative therapies to address unmet patient needs." AbbVie is continuing to evaluate the potential of upadacitinib across several immune-mediated conditions. Phase 3 trials of upadacitinib in psoriatic arthritis are ongoing, and it is also being investigated to treat Crohn's disease, ulcerative colitis and atopic dermatitis.

Building upon its history of industry-leading bold actions, Express Scripts-ESRX announced a new Advanced Opioid ManagementSMsolution that will better address our nation's opioid-addiction epidemic by working comprehensively with patients, prescribers and pharmacies to minimize early exposure while helping prevent progression to overuse and abuse. 

Wabtec-WAB has signed a contract worth about $22 million to design, install, test and commission Positive Train Control (PTC) for the Belt Railway Company of Chicago (BRC). Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for five locomotives, a back-office server, office hosting, wayside and communications design, a track database, construction, training, and system integration.  The contract is expected to be completed in 2018.

Tuesday, June 6, 2017

Apple-AAPL introduced new versions of all of its various software products. Apple also introduced new Macs and iPads along with a Siri-enabled speaker called HomePod, which can check iMessages, check sports scores and be used to listen to podcasts. The HomePod will be priced at $349 and start shipping in the U.S. in December. Amazon will be added to the Apple TV app. Apple Pay will feature person to person payments. Apple Music now has over 27 million paying subscribers, the APP store has 500 million weekly users with $70 billion having been paid out to APP store developers.

Fastenal-FAST reported total sales in May rose 14.9% to $383.5 million with average daily sales up 9.7% to $17.4 million. Daily sales growth by end market rose 8.1% for manufacturing customers and 7.2% for non-residential construction customers. Sales by product line rose 6.7% for fasteners and 11.3% for other products. Year-to-date, the company has opened 9 new stores and ended the month with 2,484 store locations. Total personnel declined 1.4% to 19,996 at the end of May.

Monday, June 5, 2017

IMBRUVICA is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie-ABBV company, and Janssen Biotech, Inc., a Johnson & Johnson-JNJ company. Recent data, which assessed the impact of treatment on the immune system and changes in circulating cells, found that IMBRUVICA reduced cancerous cells and other cells of the immunosuppressive tumor microenvironment including CLL cells (90 percent), myeloid-derived suppressor cells (MDSC, 61 percent) and some T cells (27-52 percent). At the same time, IMBRUVICA spared non-cancerous immune system cells, including naïve T cells, T memory stem cells (TSCM) and natural killer (NK) cells through one year of treatment. The data were derived from the Phase 3 RESONATE™-2 trial (PCYC-1115), which found IMBRUVICA reduced the risk of progression or death of treatment-naïve patients with CLL compared to the traditional chemotherapeutic chlorambucil. 

Thursday, June 1, 2017

3M-MMM announced that it has entered into an agreement to sell its electronic monitoring business to an affiliate of Apax Partners, a leading global private equity advisory firm, for $200 million. 3M’s business, with annual sales of approximately $95 million, is a provider of electronic monitoring technologies, serving hundreds of correctional and law enforcement agencies around the world. The transaction is expected to close in the third quarter of 2017, and upon completion of this transaction, 3M expects to record a gain of approximately $0.15 per share from this divestiture.

The European Commission has granted a marketing authorization for SPINRAZA®(nusinersen) for the treatment of 5q spinal muscular atrophy (SMA), Biogen-BIIB announced. SPINRAZA is the first approved treatment in the European Union  for SMA, a leading genetic cause of death in infants that is marked by progressive, debilitating muscle weakness. SPINRAZA was reviewed under the European Medicines Agency’s  accelerated assessment program, intended to expedite access to patients with unmet medical needs.

Private sector employment increased by 253,000 jobs from April to May according to the May ADP National Employment Report®. "May proved to be a very strong month for job growth," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Professional and business services had the strongest monthly increase since 2014. This may be an indicator of broader strength in the workforce since these services are relied on by many industries." Mark Zandi, chief economist of Moody's Analytics, said, "Job growth is rip-roaring. The current pace of job growth is nearly three times the rate necessary to absorb growth in the labor force. Increasingly, businesses' number one challenge will be a shortage of labor."  

Friday, May 26, 2017

The United States Department of Energy announced that Four Rivers Nuclear Partnership, LLC., a CH2M-led company with partners Fluor-FLR and BWX Technologies, Inc., was awarded the Paducah Deactivation and Remediation (D&R) Contract at the Paducah Gaseous Diffusion Plant. The Paducah site is situated on approximately 3,500 acres in Western Kentucky, eight miles west of Paducah, Kentucky, and 3.5 miles south of the Ohio River. The performance based contract is valued at approximately $1.5 billion over ten years; the base term is five years valued at approximately $750 million, followed by three-year and two-year option periods, valued at an approximate total of $750 million combined. A transition period is scheduled to begin on June 2017.

Thursday, May 25, 2017
Hormel-HRL
reported second fiscal quarter sales declined 5% to $2.2 billion with net income and EPS dipping 2% to $211 million and $0.39, respectively. Ongoing challenges in the turkey industry gobbled up Hormel sales and earnings as turkey prices remained at seven year lows due to overproduction, which is expected to persist until industry-wide production is cut. Pricing pressure from competing proteins and increased expenditures on biosecurity to protect the flocks from future flu outbreaks also ate up Jennie-O segment results during the quarter. For the quarter, Jennie-O Turkey Store segment sales dropped 8% to $388 million on a 6% volume decline with segment operating profit falling 29% to $64 million. Refrigerated Foods segment sales declined 6% to $1 billion and operating profit was flat, primarily due to the divestiture of the profitable Farmer John subsidiary which is no longer strategically aligned with Hormel’s business. Excluding the divestiture, Refrigerated Foods sales increased 5% year-over-year. Grocery Products sales increased 8% to $432 million and segment profit increased 15%, fattened by the addition of JUSTIN'S® specialty nut butters as well as the strong performance of WHOLLY GUACAMOLE® dips and SPAM® luncheon meat. Specialty Foods sales declined 24% to $208 million with operating profit declining 16%, primarily related to the divestiture of Diamond Crystal Brands in May 2016 and reduced contract packaging sales. International sales increased 19% to $131 million with profit margins up 38% on strong exports of fresh pork and beefed-up SPAM® luncheon meats sales. During the quarter, Hormel generated operating cash flow of $84 million, down 55% from last year, squeezed by a $30 million tax payment and compensation accruals. Capital expenditures were $39 million during the quarter compared to $66 million last year. For the full fiscal year, Hormel expects capital expenditures of $190 million. Hormel ended the quarter with $549 million in cash and $250 million in long-term debt on its sturdy balance. On May 15th, Hormel paid its 355th consecutive quarterly dividend at the annual rate of $0.68. Given expected continued weakness in turkey prices, management pushed its full year guidance to the lower end of the $1.65 to $1.71 range.

After rumors that Constellation Brands had indicated interest in acquiring Brown-Forman-BFB, Brown-Forman issued the following statement from Geo. Garvin Brown IV, Chairman of the Board of Directors, and Paul C. Varga, Chief Executive Officer: "As a matter of corporate policy, Brown-Forman does not comment on market rumors or speculation. However, it is important to reiterate that Brown-Forman is not for sale. For nearly 150 years, the Company and the Brown family have been committed to preserving Brown-Forman as a thriving, family controlled, independent company. That commitment is unchanged, and our goal is to continue creating value for all shareholders for generations to come."

Tuesday, May 24, 2017
Bioverativ-BIVV
announced that it has entered into a definitive agreement to acquire South San Francisco-based True North Therapeutics, a privately-held, clinical-stage rare disease biotechnology company, for an upfront payment of $400 million plus assumed cash. True North investors are also eligible to receive additional payments of up to $425 million contingent on the achievement of future development, regulatory and sales milestones. As part of the acquisition, Bioverativ will obtain worldwide rights to True North’s lead candidate, TNT009, a first-in-class monoclonal antibody in development to treat cold agglutinin disease (CAD). CAD is a rare and chronic hemolytic condition that often leads to severe anemia, requiring numerous transfusions, and can result in life-threatening thrombotic events. There are no approved therapies for CAD, which occurs in approximately 16 people per million globally, including an estimated 5,000 people in the United States. In May 2017, the U.S. Food and Drug Administration (FDA) granted TNT009 breakthrough therapy designation for the treatment of hemolysis in patients with primary CAD, and plans for the full clinical development program, including a registrational program, are underway. Breakthrough therapy designation was created by the FDA to expedite the development and review of medicines that target serious or life-threatening conditions and have shown preliminary evidence of potential clinical benefit. The acquisition will be financed through a combination of cash on hand and debt. It is expected to close in mid-2017.

Thursday, May 18, 2017 Gentex-GNTX reported that its Board of Directors approved an increase in its quarterly cash dividend to $0.10 (10 cents) per share, representing an increase of 11 percent over the current dividend rate. The Board subsequently declared a quarterly cash dividend of $0.10 per share that will be payable July 19, 2017, to shareholders of record of the common stock at the close of business on July 6, 2017. Since 2003, Gentex has consistently grown its dividend as an efficient and consistent level of return of capital to shareholders, which represents an approximate 2 percent yield based on the Company’s current stock price. This dividend increase continues to be a key part of the Company’s overall capital allocation strategy and is evidence that the management and board of directors continue to believe in the importance of returning value to Gentex shareholders while representing further confidence in the Company’s future earnings potential.

Remedy Pharmaceuticals, a privately-held pharmaceutical company focused on bringing life-saving treatments to people affected by central nervous system diseases and injuries, announced that Biogen-BIIB completed an asset purchase of its Phase 3 candidate, CIRARA. Biogen made an upfront payment of $120 million to Remedy and may also pay additional milestone payments and royalties.

Express Scripts-ESRX, through a wholly owned subsidiary, Innovative Product Alignment, LLC, today announced it will participate in Walgreens Boots Alliance-WBA Development GmbH (WBAD) group purchasing organization. In addition, Econdisc Contracting Solutions, a group purchasing organization that contracts with manufacturers to source generic pharmaceuticals on behalf of its participants, will have access to WBAD's sourcing efforts through an arrangement between Econdisc and Innovative Product Alignment. These two organizations will immediately begin developing a transition plan to maximize supply chain efficiencies.

Wabtec-WAB has signed a contract worth about $40 million to design, install, test and commission Positive Train Control (PTC) for the South Florida Regional Transportation Authority (SFRTA), which operates the Tri-Rail commuter rail service. Under the contract, Wabtec will provide its Interoperable Electronic Train Management System (I-ETMS®) equipment for 42 locomotives and cab cars, a back-office server, wayside communications and signals, a dispatch system, training, and system integration.  Installation is expected to be completed by the end of 2018.

Qualcomm-QCOM demonstrated dynamic electric vehicle charging (DEVC), which allows vehicles to charge while driving. Based on the Qualcomm Halo™ wireless electric vehicle charging technology (WEVC), Qualcomm Technologies designed and built a wireless DEVC system capable of charging an electric vehicle (EV) dynamically at up to 20 kilowatts at highway speeds. Qualcomm Technologies also demonstrated simultaneous charging, in which two vehicles on the same track can charge dynamically at the same time. The vehicles can pick up charge in both directions along the track, and in reverse, further showcasing how the Qualcomm Halo DEVC system has been designed to support real-world implementation of dynamic charging.

Wednesday, May 17, 2017 Cisco Systems-CSCO reported third fiscal quarter revenues of $11.9 billion, down 1% year-over-year, with net income increasing 7% to $2.5 billion and EPS rising 9% to $0.50. A modest uptick in Product revenue was offset by a 2% decline in service revenue.  The uptick in Product revenue to $8.9 billion was led by Wireless and Security, which increased by 13% and 9%, respectively. Switching revenue increased by 2%. NGN Routing, Collaboration, Data Center and Service Provider Video revenue decreased by 2%, 4%, 5% and 30%, respectively. During the quarter, Cisco continued to make progress on its multi-year transformation of the business from hardware to software and services with 31% of revenues generated from subscriptions, up from 29% during last year’s third quarter.  By geographic segment, Americas revenues of $7 billion were flat on weakness by the Federal Government sector due to uncertainty surrounding the budget and weakness in Mexico. EMEA sales of $3 billion were also flat on currency headwinds in the UK and uncertainty surrounding oil prices in the Middle East. APJC sales of $1.9 billion were down 2% on tough China comps. Operating income increased 6% thanks to an 8% decline in operating expenses. As part of its restructuring efforts, Cisco announced plans to lay off an additional 1,100 people with $150 million of additional pre-tax charges expected.  During the quarter, Cisco generated $3.4 billion in cash flow from operations, up 10% year-over-year. Cisco returned $2 billion to shareholders during the quarter through repurchasing about 15 million shares at an average price of $33.71 per share for an aggregate purchase price of $500 million and dividends of $1.5 billion, up 11% from last year. In the third quarter of fiscal 2017, Cisco completed its acquisition of AppDynamics, which provides cloud application and business monitoring platforms designed to help companies improve application and business performance. Cisco also announced plans to acquire companies that will expand offerings in software-defined wide area networks, advanced analytics and AI. Cisco ended the quarter with $68 billion of cash on its sturdy balance sheet, with $65 billion of the cash held overseas. Looking ahead to the fourth quarter, the company expects revenues to decline by 4% to 6% with EPS of $0.46 to $0.51, down from $0.56 last year. 

Qualcomm-QCOM file a complaint in the United States District Court for the Southern District of California against FIH Mobile Ltd. and Hon Hai Precision Industry Co., Ltd., (together known as Foxconn), Pegatron Corporation, Wistron Corporation, and Compal Electronics, Inc., the four manufacturers of all Apple-AAPL iPhones and iPads sold worldwide, for breaching their license agreements and other commitments with Qualcomm and refusing to pay for use of Qualcomm's licensed technologies.  Qualcomm seeks an order that would require the defendants to comply with their long-standing contractual obligations to Qualcomm, as well as declaratory relief and damages. Despite a long history of consistently paying royalties under their license agreements with Qualcomm, the manufacturers now are refusing to pay royalties on the Apple products they produce.  While not disputing their contractual obligations to pay for the use of Qualcomm's inventions, the manufacturers say they must follow Apple's instructions not to pay. The license agreements with the manufacturers in many cases were entered into before Apple sold its first iPhone and Apple is not a party to the agreements.  Further, the defendants are continuing to pay Qualcomm royalties for use of Qualcomm's technology in non-Apple products, under the very same agreements that apply to the Apple products.  Qualcomm has already filed a separate claim against Apple for its unlawful interference with the license agreements between Qualcomm and these manufacturers.

Tuesday, May 16, 2017 The TJX Companies-TJX rang up first fiscal quarter sales of $7.8 billion, up 3% year-over-year, with net income increasing 5.5% to $536 million and EPS increasing a fashionable 8% to $0.82. Despite unfavorable weather in many parts of the country, comp store sales increased 1% over last year’s 7% jump, driven by customer traffic as the company gained market share in each of its four divisions. Domestic Marmaxx sales increased 2% to $5 billion while HomeGoods sales increased a fancy 11% to $1.1 billion. TJX Canada sales increased 8% to $739 million while TJX International sales dipped 3% to $957 million, pressured by transactional foreign currency headwinds. Operating margins declined by 20 basis points, as hedging gains and a strong merchandise margin were offset by wage increases and additional investments in the supply chain, IT, new concepts, new stores and remodels to support future growth.  During the quarter, TJX added 50 new stores including 17 new HomeGoods stores. In a few months, the company will open its first U.S. HomeSense store, a new concept in home goods off-price retailing that is expected to drive future growth. During the quarter, TJX generated $190 million in free cash flow, up 6% from last year. The company returned $519 million to shareholders through share repurchases of $350 million, at $77.78 per share, and dividends of $169 million.  During the quarter, TJX increased the per share dividend by 20%, marking the 21st consecutive year of annual dividend increases. TJX ended the quarter with $3 billion in cash and investments and $2 billion in long-term debt on its sturdy balance sheet.  Looking ahead, TJX expects second quarter sales to increase 4% to $8.2 billion with EPS of $0.81 to $0.83 versus $0.84 reported last year. Second quarter earnings are expected to be squeezed by wage increases and the negative impact from foreign currency, partially offset by a benefit from a change in accounting rules for stock-based compensation. For the full 2018 fiscal year which includes a 53rd week, sales are expected in the $35.3 to $35.6 billion range, up 6% to 7% from last year. The company raised the bottom range of its EPS guidance range with EPS now expected in the $3.82 to $3.89 range, up from $3.46 reported in 2017. The company expects to repurchase $1.3 billion to $1.8 billion of its shares during fiscal 2018.

Friday, May 12, 2017 Apple®-AAPL announced Corning Incorporated will receive $200 million from Apple’s new Advanced Manufacturing Fund as part of the company’s commitment to foster innovation among American manufacturers. The investment will support Corning’s R&D, capital equipment needs and state-of-the-art glass processing. Corning's 65-year-old Harrodsburg facility has been integral to the 10-year collaboration between these two innovative companies and will be the focus of Apple’s investment. Apple has committed to investing at least $1 billion with US-based companies as part of the fund, which is designed to foster innovative production and highly skilled jobs that will help lay the foundation for a new era of technology-driven manufacturing in the US. In the US, Apple now supports 2 million jobs across all 50 states, including 450,000 jobs attributable to Apple’s spend and investment with US-based suppliers. Last year alone, Apple spent over $50 billion with more than 9,000 domestic suppliers and manufacturers.

Becton Dickinson-BDX announced exercise of option to purchase additional shares by underwriters of public equity offerings, increasing total gross proceeds to $4.95 billion. Becton Dickinson intends to use the proceeds from the offerings to finance a portion of the cash consideration payable in connection with the previously announced acquisition of C. R. Bard, Inc. The acquisition is expected to close in the fall of 2017.

Wednesday, May 10, 2017 Wabtec-WAB increased its regular quarterly dividend by 20 percent, to 12 cents per share from 10 cents per share.  The new dividend rate will be payable initially Aug. 28, 2017 to shareholders of record Aug. 14, 2017.  This is the seventh consecutive year Wabtec has increased its dividend.

Priceline-PCLN reported first quarter revenues rose 14% to $2.4 billion with net income and EPS up 22% year-over-year to $456 million and $9.11 respectively. First quarter gross travel bookings were $20.7 billion, an increase of 24% over a year ago (or approximately 27% on a constant currency basis.) Gross profit was $2.3 billion, a 16% increase from the prior year (or 17% on a constant currency basis.) International operations contributed gross profit in the first quarter of $2.0 billion, a 17% increase (or 19% on a constant currency basis.) Booking.com's total property count now stands at over 1.2 million, which represents a year-over-year increase of 36%. The Booking.com platform now includes approximately 640,000 instantly bookable vacation rental properties, which is a year-over-year growth rate of 51%. During the first quarter, room nights booked increased 27% to 173 million while rental car days grew 15% driven mainly by Rentalcars.com. Free cash flow increased 6% to $310 million in the first quarter with the company repurchasing $212 million of its own shares. Priceline ended the quarter with $5.4 billion of cash and short-term investments and $7.3 billion of long-term debt on its balance sheet. Management’s outlook for the second quarter is for a 16%-21% increase in the room nights booked, a 12%-17% increase in gross total bookings, a 14%-19% increase in gross profit and EPS in the range of $12.55 - $13.25 which, at the midpoint, is up by about 11% versus prior year.

Tuesday, May 9, 2017 The Walt Disney Company- DIS reported second fiscal quarter sales increased 3% to $13.3 billion with net income up 11% to $2.4 billion and EPS up 15%, on fewer shares outstanding, to $1.50. By segment, Media Networks sales increased 3% to $5.9 billion and operating income dipped 3% to $2.2 billion. The decrease in operating income was due to higher NBA programming costs, partially offset by advertising revenue growth thanks to higher rates that were partially offset by a decline in subscribers. Management continues to work through disruption caused by the shift from tradition cable platforms to mobile digital platforms.  Given the strong demand for live sports, Disney’s iconic brands and management’s embrace of change in the rapidly evolving media landscape, Robert Iger, Chairman and CEO, remains confident that no other company is better positioned to benefit from the disruption in the media marketplace.  Disney continues to invest in digital technology including BAMTECH, a direct-to-consumer livestream platform that will provide consumers with flexible subscription options with a broad array of live sporting events.   Parks and Resorts revenues increased 9% to $4.3 billion with segment operating income increasing a magical 20% to $750 million. Operating income increased on the heels of growth at Disney’s domestic parks and resorts and last year’s third quarter opening of Shanghai Disney Resort, which expects to soon welcome its 10 millionth guest. Studio Entertainment revenues dipped 1% to $2 billion and segment operating income increased 21% to $656 million. Consumer Products & Interactive Media declined 11% to $1.1 billion and segment operating income increased 3% to $367 million. During the quarter, Disney generated $2.6 billion in free cash flow, up 7% year-over-year. The company ended the quarter with about $8 billion in cash and investments and $17 billion in long-term debt, which represented about 36% of shareholders’ equity. During the quarter, Disney repurchased 18.6 million shares for $2 billion. The company now expects to repurchase $9 billion to $10 billion of its shares during 2017. Looking ahead, management expects modest growth for this fiscal year with robust growth returning in fiscal 2018.

Berkshire Hathaway-BRKB reported the company’s net worth during the first quarter of 2017 increased by 3.5% with book value equal to $178,073 per Class A share as of 3/31/17. The $9.9 billion increase in shareholders’ equity was due to the company’s $4.1 billion in net earnings and approximately $5.8 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation. 

Berkshire’s major investment holdings had mixed results since 12-31-16. Wells Fargo’s stock rose a scant 0.7% to $27.8 billion. Apple became the apple of Buffett’s eye as the position size more than doubled since year end to $19.2 billion through appreciation and additional purchases.  Since year end, American Express rose 7% to $12 billion and Coca-Cola’s stock popped 2% to $17 billion.  On the other hand, IBM dropped 17% to $11.2 billion as Buffett shed a third of his IBM shares.  

Berkshire’s first quarter operating revenues rose 26% to $64.5 billion, reflecting in part the $10.2 billion in cash premiums received in connection with the retroactive reinsurance agreement with AIG during the quarter.  Excluding the premium, operating revenues rose 6% during the quarter.  Net income declined 27% during the quarter to $4.1 billion, reflecting the decline in investment and derivative gains to $504 million compared to the prior year gains of $1.9 billion related to the P&G and Duracell transaction.   Operating earnings (excluding investment and derivative gains/losses) declined 5% during the first quarter to $3.6 billion, due primarily to weakness in the insurance businesses. 

Berkshire’s insurance underwriting operations generated a $267 million loss during the first quarter compared to a $213 million profit in the prior year period. Increased underwriting gains from GEICO and Berkshire Hathaway Primary Group were more than offset by underwriting losses from General Re and Berkshire Hathaway Reinsurance Group due to increased loss estimates for prior years’ loss events, higher losses from current year catastrophe events and increased deferred charge amortization related to the reinsurance businesses.   Insurance investment income was relatively unchanged at $908 million during the quarter.  The float of the insurance operations approximated $105 billion as of 3/31/17, an increase of $14 billion since yearend 2016 related in large part to the AIG deal.

Burlington Northern Santa Fe’s (BNSF) revenues rose 9% during the first quarter to $5.2 billion with net earnings chugging 7% higher to $838 million, reflecting a 3% comparative increase in average revenue per car/unit and a 6% increase in volume to 2.5 million cars/units driven by a rebound in freight revenue growth from coal and broad-based growth from consumer products, industrial products and agricultural products thanks to improving economic conditions. 

Berkshire Hathaway Energy reported revenues increased 3% to $4.3 billion during the first quarter with net earnings charging 14% higher to $501 million due to improvements at most of the utilities as well as a lower tax rate. 

Berkshire’s manufacturing businesses reported a 15% increase in revenue growth in the quarter to $12.1 billion with operating earnings relatively flat at $1.5 billion. The revenue increase reflected in part the acquisitions of Precision Castparts and Duracell.  Operating earnings included a pre-tax loss of $184 million in connection with the disposition of an underperforming business acquired by Lubrizol. Excluding this loss, pre-tax earnings for the manufacturing businesses increased 13% during the quarter.

Service and Retailing revenues rose 3% during the quarter to $18.2 billion with pre-tax earnings up 5% to $481 million. Service revenues rose 11% to $2.6 billion with operating earnings soaring 16% to $260 million primarily due to improvements at NetJets and volume increases at most of TTI’s operations.   Retailing revenues declined 2% during the quarter to $3.5 billion with operating earnings up 34% to $133 million. The revenue decrease reflected a decline in revenues at Berkshire Hathaway Automotive (BHA) due to lower vehicle units sold and the timing of the Easter shift at See’s Candies. The increase in earnings was due to lower operating expenses at BHA and Nebraska Furniture Mart.  McLane’s revenues rose 3% during the quarter to $12. 1 billion due to a 4% increase in grocery sales. Operating earnings declined 35% to $88 million due to pricing pressures in an increasingly competitive business environment. 

Finance and Financial Products revenues rose 8% during the quarter to $1.9 billion with net income declining 3% to $303 million. The revenue increase was due to a 31% increase in home sales at Clayton Homes, reflecting a 20% increase in unit sales and higher average prices.  Earnings were negatively impacted by the transportation and equipment leasing business due to lower railcar sales, lower railcar and trailer fleet utilization rates and lower volume and demand for cranes and other products and services. 

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $293 billion as of 3/31/17. Excluding utility and finance investments, Berkshire ended the quarter with $266.4 billion in investments allocated approximately 50.1% to equities ($133.4 billion), 8.6% to fixed-income investments ($22.9 billion), 5.7% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($15.3 billion), 5.8% to Kraft Heinz ($15.4 billion, with a fair value of $29.6 billion as of 3-31-17), and 29.8% in cash ($79.4 billion). 

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. Apple has been the biggest new recent investment now worth about $19 billion with Buffett admitting his trigger finger is itchy after no substantial business acquisitions in 15 months. With total cash at Berkshire approximating $100 billion and earning next to nothing, Buffett spoke of paying  dividends if attractive investment opportunities do not appear over the next three years.

Free cash flow more than doubled during the first quarter to $16 billion, due primarily to the big boost to float from the AIG deal.  During the first quarter, capital expenditures declined 17% to approximately $2.4 billion, including $865 million by Berkshire Hathaway Energy and $674 million by BNSF. Berkshire Hathaway forecasts aggregate capital expenditures of about $6.5 billion over the balance of 2017 for these two businesses. During the first quarter of 2017, Berkshire purchased a net $11.3 billion in Treasury Bills and fixed-income investments and purchased a net $7.1 billion of equity securities, including the purchase of Apple and reflecting the sale of IBM shares. There were no share repurchases of Berkshire Hathaway stock.  

Berkshire Hathaway’s stock appears fairly valued, currently trading at $246,589 per A share and $164 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $196,000-$252,000 per share and the B shares to trade between $131-$168 per share.  Hold.

FactSet-FDS announced that its Board of Directors approved a 12% increase in the regular quarterly cash dividend from $0.50 per share to $0.56 per share.  The $0.06 per share increase marks the twelfth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to its shareholders. The cash dividend will be paid on June 20, 2017 to holders of record of FactSet-FDS announced that its Board of Directors approved a 12% increase in the regular quarterly cash dividend from $0.50 per share to $0.56 per share.  The $0.06 per share increase marks the twelfth consecutive year the Company has increased dividends, highlighting its continued commitment to returning value to its shareholders. The cash dividend will be paid on June 20, 2017 to holders of record of FactSet’s common stock at the close of business on May 31, 2017.

Friday, May 5, 2017 Cognizant Technology Solutions-CTSH reported first quarter revenues rose 11% to $3.5 billion with net income up 26% to $557 million and EPS up 28% to $.92. These solid results reflected the company’s accelerating shift to digital services and solutions to create value for clients and shareholders with non-GAAP operating margins expected to expand to 22% in 2019 from 18.9% in the first quarter of 2017 due to the higher-margin digital business and improved operational efficiencies.  Growth was broad-based both in business segments and by geographies. All business segments with the exception of Financial Services generated double-digit growth in the quarter as did all geographies with the exception of the U.K. Consulting and technology services represented 58% of total sales and rose 10.6% in the quarter with outsourcing revenues, representing 42% of total sales, rising 10.9% in the quarter. As the company is realigning its business, it is slowing hiring with net new employees of 1,000 added during the quarter to end the quarter with 261,200 total employees. Attrition was 14.7% during the quarter with onsite utilization of 91%.  Free cash flow rose significantly during the quarter to $161 million thanks to the higher earnings and favorable working capital changes. The company spent $1.5 billion on an accelerated share repurchase program during the quarter and also announced its initial quarterly dividend of $.15 per share to be paid on May 31, 2017. Even after the hefty share buyback, Cognizant ended the quarter with a strong balance sheet with $4.3 billion in cash and investments and $772 million in long-term debt. For the full year, Cognizant expects revenue to be in the range of $14.56 billion to $14.84 billion with non-GAAP EPS expected to be at least $3.64.

Fluor-FLR reported first quarter results with revenues up 9% to $4.8 billion and net income and EPS each falling 41% to $61 million and $.43, respectively. The primary reasons for the decline in results is the progression of current projects from higher margin engineering activities to lower margin construction activities, foreign exchange expenses based on the strengthening of the Mexican peso and a pre-tax charge of approximately $30 million for unanticipated cost increases on projects in the Industrial, Infrastructure & Power segment. New awards for the quarter were $2.3 billion, including $817 million in Energy, Chemicals and Mining, $777 million in Industrial, Infrastructure & Power, $546 million in Diversified Services (previously Maintenance, Modification & Asset Integrity) and $173 million in Government. Consolidated ending backlog decreased 10% to $41.6 billion as of quarter end and reflected an adjustment to the Magnox RSRL which will now end in August 2019. During the quarter, the company generated $270 million in cash from operating activities and $203 million in free cash flow with Fluor ending the quarter with $2.2 billion in cash and $1.5 billion in long-term debt. Fluor paid $30 million in dividends during the quarter. The lowest commodity prices in recent history and unprecedented contraction in customer spending has impacted Fluor’s operations.  Market conditions and company operations are expected to improve in the second half of 2017 and beyond.  As a result of the lower than expected first quarter results and risks around the pace of new awards, Fluor lowered their EPS guidance for 2017 to a range of $2.25 to $2.75 from the previous range of $2.75-$3.25. 

Thursday, May 4, 2017 Maximus-MMS reported second quarter revenue grew 3% to $622 million driven by 6% growth in the Health Services Segment to $349 million. On a constant currency basis, revenue would have increased 4% with most of the growth being organic. The company’s net income rose 8% during the quarter to $52.5 million with EPS up 8% to $.80 driven by favorable results on several volume-based contracts in both the U.S. Federal Services and Health Services segments. Second quarter 2016 included out-of-period revenue and pre-tax income of $15.2M ($0.16 of diluted EPS) related to two contracts in the Health Services Segment. Excluding these items from Q2 FY16, year-over year revenue would have grown 5% and diluted EPS would have grown 38%. During the second quarter of fiscal 2017, Maximus generated strong cash flows from operations of $65.7 million and free cash flow of $60.5 million. During the first two quarters of FY17, the company paid $5.8 million in dividends and repurchased $5.9 million of common stock. The company has $109 million remaining authorized for future share repurchases. Year-to-date signed contract awards at 3/31/17 totaled $1.5 billion and includes a three-year contract extension with the State of New York. New contracts pending (awarded but unsigned) totaled $155.1 million. The sales pipeline at 3/31/17 was $3.3 billion, comprised of approximately $.6 billion in proposals pending, $.9 billion in proposals in preparations and $1.9 billion in opportunities tracking. Maximus reiterated its 2017 revenue guidance of $2.425 billion to $2.475 billion and narrowed EPS guidance from $2.90 to $3.10 to $3.00 to $3.10. The company is also reiterating free cash flow guidance in the range of $170 million to $220 million, representing 27% to 64% growth in free cash flow over last year.

Bioverativ-BIVV reported healthy first quarter revenue growth of 35% to $259 million with net income up 4% to $69.3 million and EPS up 3% to $.62. The revenue growth was driven by strong ongoing performance from the hemophilia portfolio as an increasing number of patients are treated with the company’s therapies across each of their geographies. Cash flow from operations more than doubled during the first quarter to $108 million. Bioverativ’s strong financial position with no long-term debt and more than $358 million in cash as of quarter end provides the company with the ability to invest in innovation while remaining focused on maximizing shareholder value. Management’s outlook for fiscal 2017 is for 17% to 19% revenue growth and non-GAAP operating margins in the range of 43% to 47%. After a strong start to the year, Bioverativ’s priorities are to maximize ELOCTATE AND ALPROLIX SALES, advance its new product pipeline and pursue strategic merger and acquisition opportunities to build a successful rare disease company.

Apple-AAPL announced it is launching a $1 billion investment fund to grow advanced manufacturing in the United States. “If we can create many manufacturing jobs ... [they] create more jobs around them because you have a service industry that builds up around them,” Tim Cook, Apple’s CEO, said in a CNBC interview.

Fluor-FLR announced that the Fluor-led joint venture comprised of Fluor and Balfour Beatty Infrastructure, Inc., was selected by the Texas Department of Transportation (TxDOT) as the design-build and capital maintenance team for the estimated $625 million Southern Gateway reconstruction and improvement project located along Interstate I-35E and U.S. 67 in Dallas. Fluor will book its share of the contract value into backlog in the second quarter of 2017.

Fastenal-FAST reported April sales rose 3.7% to $343.8 million with average daily sales up 8.9% to $17,188. Daily sales growth by end market was 7.1% in manufacturing and 6.6% in non-residential construction. Daily sales growth by product line was 6% for fasteners and 10.7% for other items. Fastenal has opened 7 new locations year-to-date and ended April with a total store count of 2,482. Total personnel declined 3% to 19,883.

Wednesday, May 3, 2017 The Cheesecake Factory-CAKE reported first quarter revenue rose 2% to $563 million with net income up 3% to $35 million and EPS up 4% to $.71. Comparable store sales increased .3% and reflected the 29th consecutive quarter of positive comparable sales, again outperforming the casual dining industry. The comps moderated during the quarter due to weather and the shift in the Easter holiday. While pricing was up 2.4% during the quarter, traffic declined 2.3% as many patios had to be closed due to weather. The company opened its first Hong Kong location under a licensing agreement to greater than expected demand. The Cheesecake Factory also plans its first location in Canada with a company-owned store planned for Toronto later this year. The company expects to open as many as eight company-owned restaurants in fiscal 2017 and four to five restaurants under licensing agreements internationally. Capital expenditures should range between $125 million to $140 million for the full year.  Free cash flow was $29 million in the first quarter with the company repurchasing 150,000 shares at a cost of $9.3 million at an average price of $62 per share. Management plans to continue to return free cash flow to shareholders through dividends and share repurchases with $100 million in share repurchases earmarked for fiscal 2017. Due to the weak consumer environment with first quarter GDP at just .7% in a low-growth environment, the company expects a modest tempering of revenue growth with comparable store sales now expected in the .5% to 1.5% range for the full fiscal 2017 year with EPS in the range of $2.93 to $3.02.

Automatic Data Processing-ADP reported fiscal third quarter revenues rose 5% to $3.4 billion with net income up 10% to $587.9 million and EPS up 12% to $1.31, which included tax benefits and a lower share count due to share repurchases. Operating earnings increased 4% as operating margin declined 20 basis points during the quarter to 24.6% driven by slower revenue growth and investments in product, sales and services. Management was disappointed in a 7% decline in new business bookings during the quarter as well as Employer Services client revenue retention which declined 170 basis points compared to last year. The decline in client retention was due in part to ADP migrating customers from legacy platforms to upgraded platforms with some customers electing to forgo the upgrade and move elsewhere to take the business back in-house. New business bookings have been on pause given the political uncertainty around many of the services ADP provides especially as related to the Affordable Care Act. ADP now assumes worldwide new business bookings will decrease 5% to 7% compared to the prior forecast of flat new business bookings for the year. Interest on funds held for clients increased 9% to $112 million during the quarter as average client fund balances increased 2% to $27.3 billion and the average interest yield on client funds increased 10 basis points to 1.6%. Free cash flow increased 35% during the first nine months to $1.5 billion with the company paying $739 million in dividends and repurchasing $957 million of its shares, including 1.9 million shares for $191 million in the latest quarter at an average price of $100.52 per share. Despite a very challenging quarter, management reaffirmed its guidance for the full fiscal 2017 year with revenues expected to grow 6% and adjusted EPS growth of 13% to 14% with 50 basis points of adjusted operating margin expansion. ADP continues to expect to repurchase $1.2 to $1.4 billion of its own shares for the full fiscal year funded by existing cash.

Tuesday, May 2, 2017 Apple-AAPL reported second quarter revenues rose 4.6% to $52.9 billion with net income up 4.9% to $11 billion and EPS up 10.5% to $2.10. International sales accounted for 65% of the quarter’s revenue. Revenue growth accelerated from the December quarter due to continued robust demand for iPhone 7 Plus. iPhone revenues rose 1% to $33.2 billion with unit growth dipping 1% as the average selling price increased 2% to $655. iPad sales declined 12% during the quarter to $3.9 billion on a 13% decline in unit volume although these results were better than management expected. The iPad resumed growth in the U.S. during the quarter and maintains an 81% market share for tablets costing more than $200. Mac sales increased 14% to $5.8 billion on unit growth of 4% compared to flat growth in the PC market as the Mac gained market share. Services increased 18% during the quarter to $7 billion with the Services unit on its way to becoming the size of a Fortune 100 company. Apple has 165 million subscribers to its various Services with a 15 million pickup in subscribers since December with 40% growth in the App Store. Other products, including the Apple TV, Apple Watch, Beats, iPods and AirPods, grew revenues 31% during the quarter to $2.9 billion with Apple Watch sales doubling. Free cash flow was relatively flat for the first half of the year at $33 billion. Apple paid $6.1 billion in dividends in the first half and repurchased $18 billion of its own shares, ending the quarter with more than $256 billion in cash and investments and $84.5 billion of long-term debt on its strong balance sheet. Given the strength of the business and management’s confidence in the future, Apple announced another $50 billion increase in their capital return program as management’s goal is to return free cash flow to shareholders. The Board increased the share repurchase authorization to $210 billion from $175 billion. The Board also approved a 10.5% increase in the dividend, making Apple one of the largest dividend payers in the world. From the inception of its capital return program in August 2012, Apple has returned over $211 billion to shareholders, including $151 billion in share repurchases. In the next four quarters, Apple expects to return $89 billion to shareholders, representing about 12% of the company’s current market capitalization.  About 93% of Apple’s massive cash stash is held outside the U.S. If Apple could repatriate its cash at a lower tax rate through potential tax reform, they would reassess their capital return program For fiscal 2017, Apple expects revenues between $43.5 billion and $45.5 billion with a gross margin between 37.5% and 38.5%, operating expenses between $6.6 billion and $6.7 billion and other income of $450 million with a tax rate of 25.5%. (On a separate matter, Apple acknowledged that it was withholding royalty payments to Qualcomm-QCOM under their ongoing litigation until the court decides a reasonable royalty rate or the companies come to a settlement. )

Mastercard-MA reported first quarter revenues charged up 12% to $2.7 billion with net income increasing 14% to $1.1 billion and EPS up 16% to $1.00. First quarter worldwide Gross Dollar Volume (GVD) increased 5% to 1.2 trillion, reflecting 2% growth in the U.S. and 6%, or 11% in local currency, growth outside the U.S. During the quarter, Mastercard saw a modest pickup in global growth, although uncertainty about the direction of trade policies remains a concern. U.S. consumer and business confidence remained strong during the quarter.  With the rising U.S. employment, wages are beginning to increase and retail spend, excluding autos, increased nearly 4% year-over-year. Brazil is showing signs of rebounding from its two-year recession and unemployment in Europe closed in on a nine-year low during the quarter. Germany’s economy remained solid while rising inflation and some uncertainty surrounding the impact of the Brexit negotiations weighed on growth in the U.K., Italy and France. Despite some ongoing uncertainty in China, economic indicators show high consumer and business confidence with moderate growth. India’s growth continues to be strong, and Mastercard is working with the government to support electronic payments as part of the country’s demonetization efforts. Meanwhile, Mastercard continues to drive double-digit volume and transaction growth across most markets. Cross-border volume—transactions where the merchant’s country differs from the cardholder’s country—increased a solid 13% while switched transactions (authorization, clearing and settlement) rose 17% globally to 14.7 billion, with strong double-digit growth in all regions except the U.S. Globally, there are 2.4 billion Mastercard-branded cards.  During the quarter, Mastercard generated $681 million in free cash flow, down 33% year-over-year, on changes in working capital needs and higher capital expenditures. Mastercard completed two acquisitions, VocaLink and NuData Security, with the goal of expanding into new payment flows and enhancing its safety and security offerings. Looking ahead to the full year, Mastercard expects net revenue to increase at a low-double-digit rate on a currency-neutral basis with operating expenses to grow in the high-single-digits including higher expenditures to support the rollout of Masterpass and other innovations.

Cisco-CSCO announced its intent to acquire Viptela Inc., a privately held software-defined wide area network (SD-WAN) company based in San Jose. Viptela will expand Cisco's SD-WAN portfolio with increased functionality and simplicity delivered through the cloud. Cisco will acquire Viptela for $610 million in cash and assumed equity awards. The acquisition is expected to close in the second half of calendar 2017.

Becton Dickinson-BDX reported second quarter revenues declined 3% to $3 billion with net income up 2% to $344 million and EPS up 1% to $1.58. The revenue decline reflected the divestiture of the Respiratory Solutions business. On a comparable, currency-neutral basis, revenue grew 5% during the quarter and adjusted currency-neutral EPS grew 13%. The company reported underlying operating margin expansion of 180 basis points during the quarter on its way to expected 200-225 operating margin expansion for the full year due to operational efficiencies and manufacturing synergies. The BD Medical segment reported revenues of $2 billion reflecting strong performance in the Medication and Procedural Solutions and Medication Management Solutions units. The BD Life Sciences unit increased revenues 5% to $982 million reflecting strong performance in the Diagnostics Systems and Preanalytical Systems units. On a geographic basis, U.S. revenues were $1.6 billion with revenues outside the U.S. of $1.3 billion. Revenues in China grew 12% and revenues in emerging markets grew 9%. With the pending acquisition of C.R. Bard which is expected to close in the Fall of 2017, the combined company will have revenues approximating $16 billion and a presence in almost every country around the world. Despite a change in accounting for a business unit which will curtail EPS by $.20-$.25, management reaffirmed its guidance for the full fiscal 2017 year with reported revenues expected to decline 3.5% to 4% due to the divestiture. Excluding the divestiture, currency-neutral revenue should increase 4.5% to 5% for the year. Fiscal 2017 reported EPS should be between $7.73 and $7.83, representing growth of approximately 72% to 74%, while on a currency-neutral basis, adjusted EPS should be between $9.35 to $9.45, representing growth of approximately  9% to 10% over last year’s adjusted EPS.  Free cash flow should approximate $2 billion for fiscal 2017 with the company using most of the cash to pay down debt related to the acquisition of CareFusion. Over the last two years, $3.5 billion of the CareFusion debt has been repaid.

Baxter International-BAX announced that its Board of Directors has declared a 23 percent increase in the company’s quarterly dividend rate, from the previous rate of $0.13 per Baxter common share to $0.16 per share. The dividend is payable on July 3, 2017 to stockholders of record as of June 2, 2017. “Baxter is pleased to raise our quarterly dividend rate, which reflects the company’s strong financial performance and commitment to enhancing shareholder value,” said José (Joe) E. Almeida, chairman and chief executive officer. “This new rate aligns with our disciplined approach to capital allocation, as we strategically balance reinvestment in the business to drive sustainable growth along with returning value to our shareholders.”

Friday, April 28, 2017 Qualcomm-QCOM announced that it has been informed by Apple-AAPL that Apple is withholding payments to its contract manufacturers for the royalties those contract manufacturers owe under their licenses with Qualcomm for sales during the quarter ended March 31, 2017.  Apple has indicated it will continue this behavior until its dispute with Qualcomm is resolved. As a result of the above developments, Qualcomm updated  financial guidance for the third quarter of fiscal 2017 to exclude royalty revenues from Apple's contract manufacturers.  The contract manufacturers may make some form of partial payment, but initial indications are that any payment would likely be insignificant.  As a result of these actions, the company is adjusting financial guidance to assume that no payment is made, and therefore no revenues are recognized, in the quarter.  Current guidance is for third quarter revenues to declined 7% to 21% with EPS expected to decline 36% to 46% to a range of $.52-$.62. 

Microsoft-MSFT reported fiscal third quarter revenues rose 8% to $22.1 billion with net income up 28% to $4.8 billion and EPS 30% higher to $.61. On an adjusted constant-currency basis, revenue rose 7% with net income up 16% and EPS up 19%. Revenue in Productivity and Business Processes grew 22% (up 23% constant currency) to $8 billion driven by Office 365 commercial revenue growth of 45% as Office 365 consumer subscribers increased to 26.2 million. The LinkedIn acquisition contributed $975 million. Revenue in Intelligent Cloud grew 11% (12% in constant currency) to $6.8 billion with Azure revenue up 93%. Revenue in More Personal Computing declined 7% (down 7% in constant currency) to $8.8 billion Surface revenue decreased 26% and Windows commercial products and cloud services revenue grew 6%. Gaming revenue increased 4% with more than 50 million active users. The company generated $9 billion in free cash flow, up 11% year over year, with the company ending the quarter with $126 billion in cash and investments and $76 billion in long-term debt. Year-to-date, the company repurchased $10 billion of stock and paid $8.8 billion in dividends. The third quarter results showed continued demand for Microsoft’s cloud-based services with commercial cloud annualized revenue running at a rate exceeding $15 billion with the company on track to achieve $20 billion in cloud revenues in fiscal 2018.

Thursday, April 27, 2017 Starbucks-SBUX reported second quarter revenues rose 6% to $5.3 billion with net income up 14% to $652.8 million and EPS up 15% to $.45. Global comparable store sales increased 3% with U.S. comp store sales up 3% comprised of a 4% increase in average ticket and a 2% decrease in transactions. China comp store sales increased 7% driven by a 6% increase in transactions. On the negative side, the decline in mall traffic is impacting mall-based Teavana stores which have seen growing declines in sales.  The company’s operating margin expanded 40 basis points to a second quarter record 17.7% primarily due to sales leverage. The company repurchased 11.3 million of its shares in the second quarter for $600 million at an average price of approximately $53.10 per share with 99 million shares remaining authorized for future share repurchases. Active membership in Starbucks Rewards grew 11% year over year to 13.3 million members. Starbucks Rewards represented 36% of U.S. company-operated sales in the quarter with Mobile Payment reaching 29% of transactions and Mobile Order and Pay growing to 8% of transactions. Total stores reached 26,161 in 75 countries globally, with the opening of 427 net new stores during the quarter. U.S. business accelerated sequentially during the quarter, culminating with a 4% U.S. comp in March with further acceleration seen in April. Management is highly confident that the company will deliver mid-single digit comps for the full fiscal 2017 year. The company is making investments to increase throughput and capacity in its stores with accelerating momentum in beverage, food and technology innovation which will be introduced in the months ahead. Starbucks Roasteries are under construction in key cities around the world which will further elevate the company’s strong global brand. By fiscal 2021, the company plans to open 12,000 new stores globally and 3,400 net new stores in the U.S. Management maintained their long-term guidance for 10% annual growth in sales and 15%-20% growth  in EPS. However, given short-term issues, Starbucks lowered their fiscal revenue growth outlook to the low end of their previously forecasted +8-10% growth range, excluding an extra week and foreign exchange, and lowered their forecasted fiscal 2017 EPS  range to $2.08-2.12 from $2.12-2.14.

Alphabet-GOOGL reported first quarter revenues rose 22% to $25 billion with net income up 29% to $5.4 billion and EPS up 28% to $7.73. On a geographic basis, revenues clicked up 25% in the U.S. to $11.8 billion, EMEA revenues rose 13% to $8.1 billion, APAC revenues gained 26% to $3.6 billion and Other Americas revenues increased 34% to $1.3 billion.  Google segment revenues rose 22% to $24.5 billion with operating income up 22% to $7.6 billion during the quarter. Google advertising revenues increased 19% to $21 billion. During the quarter, Google expanded safeguards for ad placement by broadening the definition of inappropriate content and adding controls for advertisers including the deployment of machine learning to identify extreme content. Aggregate paid clicks jumped 44% during the quarter with aggregate cost-per-click down 19% due to explosion in mobile. Traffic acquisition costs (TAC) increased 22% to $4.6 billion and represented 22% of Google’s advertising revenue.  Other Bets revenues rose 48% to $244 million with the operating loss expanding to $855 million from $774 million last year. In the Other Bets segment, Waymo, Alphabet’s standalone driverless car unit, embarked on an early rider program where applicants accepted into the program summon a Waymo driverless car via an app to go wherever they want in the Phoenix metropolitan area at any hour. The free program will allow Alphabet to collect reams of data about how driverless cars will be used in practice. Nest, high-speed Internet provider Google Fiber and Verily, the life sciences start-up, also contributed to Other Bets results. Operating cash flow increased 25% from last year’s first quarter to $9.5 billion. Google’s capital expenditures increased 18% year-over-year to $2.4 billion as the company continued its investment in the Google cloud and machine learning. Other Bets capital expenditures declined to $170 million, down from $277 million last year, as management paced Other Bets investments based on milestones obtained. Free cash flow increased 35% to $7 billion with the company repurchasing $1.1 billion of its own shares during the quarter. Alphabet ended the quarter with $92 billion in cash and marketable securities on its fortress balance sheet. Cash held overseas accounted for about 60% of Alphabet’s total cash hoard.

AbbVie-ABBV reported a healthy 10% increase in first quarter sales to $6.5 billion with net income increasing 26% to $1.7 billion and EPS increasing 28% to $1.06. Excluding amortizations and other specified items, adjusted EPS increased 11% year-over-year to $1.28. Global HUMIRA sales, which accounted for about 63% of total sales during the quarter, increased 15% to $4 billion. Domestic HUMIRA sales grew 23% to $2.7 billion on a 12% volume increase. Despite the presence of biosimilar completion in Europe, international HUMIRA sales grew 3% to $1.4 billion. Global sales of IMBRUVICA, AbbVie’s treatment for blood cancer, increased 45% to $551 million. During the quarter, AbbVie continued its strong commercial execution and made significant pipeline progress. Highlights include the submission of a supplemental New Drug Application for IMBRUVICA in chronic graft-versus-host-disease, the first therapy specifically approved to treat this condition.  IMBRUVICA was approved to treat marginal zone lymphoma, marking the fifth unique type of blood cancer indication for the drug.  In women’s health, the company successfully completed Phase 2 trials demonstrating the efficacy of elagolix, AbbVie’s drug to treat uterine fibroids. The FDA accepted AbbVie’s New Drug Application and granted priority review for  the company’s next generation drug to treat hepatitis C virus, a once daily treatment shown to be effective in curing even the most difficult to treat strains of the virus in 8 weeks. The company also announced the start of two Phase 2 trials to evaluate a drug to treat early Alzheimer’s disease and PSP. In addition, AbbVie expects to report on dozen pivotal late-stage trials during 2017 in addition to announcing several regulatory submissions and approvals.  Talk of tax reform has been “incredibly encouraging” for AbbVie’s leadership team as reform will improve the company’s global competitive position. Access to overseas cash will encourage companies like AbbVie that have considerable offshore cash to invest in the U.S. and create U.S. jobs. HUMIRA generates tremendous, sustainable cash flow, which exceeds cash needed to reinvest in the business. Once there is clarity about the specifics of tax reform, AbbVie will assess the best way to reward shareholders for the incredible success of HUMIRA. Management confirmed its EPS guidance for the full-year 2017 of $4.55 to $4.65. Adjusted EPS are expected to increase nearly 14% at the guidance midpoint.   

Johnson & Johnson-JNJ announced that its Board of Directors has declared a 5.0% increase in the quarterly dividend rate, from $0.80 per share to $0.84 per share.  "In recognition of our 2016 results, strong financial position and confidence in the future of Johnson & Johnson, the Board has voted to increase the quarterly dividend for the 55th consecutive year," said Alex Gorsky, Chairman and Chief Executive Officer of the company. At the new rate, the indicated dividend on an annual basis is $3.36 per share compared to the previous rate of $3.20 per share.

Westwood Holdings-WHG reported first quarter revenue rose 12% to $32.6 million with net income up 72% to $6.1 million and EPS up 66% to $.73. The increase in revenues was related to higher average assets under management (AUM) which increased 5% from the prior year to end the quarter at $22.1 billion. Assets under advisement totaled $1.1 billion compared to $325 million in the prior year period. Non-U.S. clients reached a record 20% of AUM. Emerging Markets strategies outperformed their benchmarks with double-digit returns in the quarter. The new tax-efficient, high-conviction Select Equity strategy is off to a good start, outperforming its benchmark for the quarter. Free cash flow declined 41% during the quarter primarily due to fewer sales of investments. The company ended the quarter with a strong balance sheet with no long-term debt and more than $75 million in cash and investments or $8.48 per share in cash. The company paid out $6.5 million in dividends during the quarter, a 15% increase over the prior year, with the dividend currently yielding an attractive 4.6%. 

UPS-UPS reported first quarter revenue increased 6% to $15.3 billion with net income up 2% to $1.2 billion and EPS up 4% to $1.32. The company delivered healthy growth across all three business segments, led by13% revenue growth in the Supply Chain & Freight business. Operating profit in the Supply Chain & Freight business jumped 22% and contributed to improved earnings along with strong underlying performance in the International segment and solid results in the Domestic segment. Total fuel expenses increased 43% during the quarter which dampened profit growth. UPS is heavily reinvesting in its business to support future growth with capital expenditures of $938 million during the first quarter. Management expects capital expenditures will approximate 5% to 6% of sales this year. During the quarter, the company paid dividends of $774 million, an increase of 6.4% over last year, with the company targeting a 50%-55% dividend payout ratio over the long term. UPS also repurchased 4.2 million shares during the quarter for $450 million at an average price of $107.14 per share. The company expects share repurchases will approximate $1 billion to $1.8 billion this year. UPS reaffirmed 2017 adjusted EPS guidance to be between $5.80-$6.10, which includes more than $400 million or $.30 per share of pre-tax currency headwinds. Management noted that the U.S. economic outlook has improved with economic growth expected to increase slightly for the balance of the year. Consumer confidence is at a 15-year high and the labor market is tightening. Global growth is showing positive momentum with trade accelerating. Export growth is at the highest level since 2010 with UPS growing market share around the world. Management believes the proposed corporate tax reform which would lower corporate tax rates to 15% would be “very, very positive” for UPS, which has an effective tax rate of 35% currently. Lower corporate tax rates would help American companies be more competitive and increase jobs.

Wednesday, April 26, 2017 F5 Networks-FFIV reported second fiscal quarter sales increased 7% to $518 million with net income up 24% to $93 million and EPS storming ahead 29% to $1.43 on fewer shares outstanding. Sales growth was powered by new product introductions and strong U.S. enterprise and service provider sales. Product revenue, which represented 47% of total sales, increased 7% year-over-year, up from 2% growth in the first quarter. Service revenue, representing 53% of total sales, also increased 7% during the quarter. By geography, the Americas (56% of total sales)  increased 7%, while Europe, Middle East & Africa (EMEA) sales (24% of total sales) increased 4%, Asia-Pacific (15% of total sales) increased 16% while Japan (5% of total sales) dipped slightly. Enterprise customers accounted for 65% of sales during the quarter while service providers accounted for 22% and government customers accounted for 13%, including 4% from the U.S. Federal government. Four distributors accounted for more than 10% of F5 Networks’ sales during the quarter. During the quarter, the company generated $175.3 million in cash flow from operations and $165.7 million in free cash flow, representing 178% of reported net income, swollen by $84 million in deferred revenue booked during the quarter. During the second quarter, F5 Networks repurchased 1.1 million shares at an average price of $138.16 per share for a total of $150 million. F5 Networks ended the quarter with $1.2 billion in cash and investments on its weather-resistant balance sheet.  Several new products scheduled to begin shipping in the current quarter are expected to drive product revenue growth during the third quarter. These products are designed to help customers deploy their applications across a variety of cloud environments. Products include Application Connector 1.0 for connecting public and private cloud application infrastructures, support for BIG-IP in the Google Public Cloud, and Container Connector and Application Services Proxy for microservices environments. Optimism surrounding the new product launches is tempered by ongoing uncertainty in the EMEA region. Therefore, management expects third fiscal quarter sales of $520 to $530 million, up 5.7% year-over-year at the midpoint, with EPS in the range of $1.47 to $1.50, up 15% at the midpoint. 

United Technologies-UTX delivered solid first quarter results with global sales increasing 3% to $13.8 billion, net income from continuing operations growing 18% to $1.4 billion and EPS jumping 23% to $1.73. Excluding restructuring and other items, EPS increased 1%. Sales growth during the quarter was broad-based with all four business segments generating top line growth. Management was encouraged by signs of momentum in the global economy during the quarter with “really good strength in the U.S.” and recovery in Europe. Even in China, United Technologies saw good economic growth, although some of the markets UTX operates in continue to be challenged from a pricing standpoint. By business segment, Otis sales gained 3.3% to $2.8 billion, lifted by a 6% gain in service sales. New equipment orders at Otis were up 4% on a 30% increase in North America and Europe, partially offset by a 10% decline in orders from China. Climate, Controls and Security sales increased 4% to $3.9 billion on solid sales growth in commercial refrigeration and North American HVAC. New equipment orders were up 7%, the strongest quarterly growth since the fourth quarter of 2014. Pratt & Whitney sales rose 5% to $3.8 billion on strength in the commercial and military aftermarket. Aerospace Systems sales gained 3% to $3.6 billion, boosted by a 12% rise in the commercial aftermarket.  During the quarter, United Technologies generated $993 million in operating cash flow and $668 million in free cash flow, representing 48% of net income. During the first quarter, the company invested $325 million in capital expenditures, up 30% from last year’s first quarter, as the company continues to focus on new materials and manufacturing processes. To that end, UTX launched a state-of-the-art digital accelerator during the quarter as part of a $300 million investment over several years, focused on leveraging software, analytics and the Internet of Things to drive enhanced customer experience, product innovation and productivity improvements. The company paid $505 million in dividends during the quarter and repurchased $930 million shares, well on its way to the $3.5 billion in repurchases planned for the full year. During the conference call, management reiterated its $1 billion to $2 billion placeholder for opportunistic M&A during 2017 and its outlook for the full year. Total 2017 sales are expected in the $57.5 billion to $59 billion range, up 1% to 3% on organic sales growth of 2% to 4%. Free cash flow is expected to be 90 to 100 percent of net income with adjusted EPS between $6.30 to $6.60.  

  1. Rowe Price-TROW reported first quarter revenues rose 12% to $1.1 billion with net income up 26% to $377.2 million and EPS up 31% to $1.54.  Excluding the impact of a $50 million insurance recovery, net income and EPS still grew at double-digit rates of 14% and 17%, respectively. Assets under management increased 13% year over year to $861.6 billion as of quarter end. The $50.8 billion increase in assets under management reflected a net $700 million in cash inflows and $50.1 billion in net market appreciation. The firm’s net cash flows continued to be impacted by clients reallocating to passive investments.  T. Rowe Price remains debt-free with ample liquidity including cash and investment holdings of $2.2 billion and redeemable seed capital investments in sponsored investment portfolios of $1.3 billion. The company’s shares outstanding decreased since year end, as the firm spent $316.3 million to repurchase 4.6 million of its own shares (1.9% of outstanding shares) at an average price of $68.76 per share during the first quarter. The company provides a stalwart dividend yielding more than 3% based on current market prices. William J. Stromberg, the company's president and chief executive officer, commented: "Solid earnings expectations and strengthening global economic data helped U.S. stocks sustain their post-election rally and record tangible gains in the first quarter of 2017. Indexes did turn mixed in March, however, following the Federal Reserve's mid-month decision to raise short-term interest rates and concerns that the new administration's legislative agenda could face greater headwinds than previously believed.”

Baxter International-BAX reported first quarter revenue increased 4%, or 7% on an operational basis, to $2.5 billion with net income and EPS from continuing operations both down 92% to $273 million and $.50, respectively. On an adjusted basis, excluding special items related to business optimization and intangible asset amortization, EPS was $.58, representing a 61% increase over last year’s adjusted EPS, excluding the gain from the spinoff of Baxalta. Strong operational performance and a disciplined focus on cost management led to a solid start to 2017. Adjusted operating margin expanded 590 basis points to 16.4% during the quarter.  Baxter has a robust product pipeline with 100+ product launches planned between 2016 and 2020. Free cash flow improved significantly during the quarter to $83 million reflecting effective working capital management and lower capital expenditures. Management expects free cash flow to exceed $1 billion for the full year. The company’s capital deployment policy is to reinvest in the business, target a 35% dividend payout, repurchase shares and make acquisitions that add value for shareholders. During the first quarter, Baxter repurchased 1 million shares for $50 million at an average price of $50 per share. The Claris Injectables acquisition is expected to close in the second half of 2017. Excluding the Claris acquisition, Baxter raised its financial outlook for 2017 with sales now expected to grow 1%-2% on a reported basis or 2%-3% on a constant currency basis with EPS, before special items, expected in the range of $2.20-$2.28, representing 12% to 16% growth over last year’s adjusted EPS.

Tuesday, April 25, 2017 Wabtec-WAB reported first quarter revenues rose 19% to $916 million with net income down 22% to $73.9 million and EPS down 25% to $.77. Higher sales in the Transit Group, due primarily to the Faiveley acquisition, offset lower sales in the Freight Group which were affected mainly by lower revenues from train control-related equipment and services and lower industry deliveries of new freight cars and locomotives. Earnings were negatively impacted by lower gross margins, higher operating expenses and significantly higher interest expense related to the debt taken on for the Faiveley acquisition. Management is focused on repaying the debt from its strong cash flow generation.  At quarter end, the company had cash of $280 million and debt of $1.87 billion. Wabtec is also using its free cash flow to fund internal growth, make other strategic acquisitions and pay dividends and repurchase shares. During the first quarter, Wabtec acquired Aero Transportation Products, a manufacturer of hatch covers and outlet gates for freight cars with annual sales of $40 million. Subsequent to quarter end, Wabtec acquired Thermal Transfer, a maker of heat exchangers for industrial markets, with annual sales of about $25 million and Semvac, a European-based manufacturer of sanitation systems for transit vehicles with annual sales of about $15 million. During the quarter, the company announced a $97 million contract to provide signaling and communications services to TEX Rail, a new commuter rail line being developed by the Fort Worth Transportation Authority. The company ended the quarter with a record multi-year backlog of $4.1 billion with a book to bill ratio of one. The rolling 12-month backlog is $2 billion. Wabtec reaffirmed its 2017 financial guidance with revenues expected to be about $4.1 billion with adjusted EPS expected to be between $3.95 and $4.15, excluding restructuring and transaction expenses related to the Faiveley acquisition. This represents 6%-7% growth at the midpoint compared to last year’s adjusted earnings. Management expects quarterly results to improve sequentially as it continues to integrate the acquisitions. 

Stryker-SYK reported a healthy 18% increase in first quarter sales to $2.96 billion with net earnings up 10% to $444 million and EPS up 9% to $1.17. Excluding the 10.6% impact of acquisitions, net sales in the quarter increased 8.2% in constant currency, including 9.2% from increased unit volume partially offset by 1% due to lower prices. First quarter results were well-balanced across geographies and business segments. U.S. sales increased 19% to $2.17 billion while sales outside the U.S. increased 17% to $789 million. By segment, MedSurg sales surged 36% to $1.3 billion, boosted by the Physio-Control and Sage Products acquisitions that contributed $245 million to Stryker’s sales during the quarter.  Orthopaedics sales increased 7.4% to $1.3 billion on the heels of the full launch of Stryker’s Mako robotic knee replacement platform. During the quarter, 18 Mako robots were installed, including 11 in the U.S. Through forty training centers, two hundred surgeons have been trained to perform total knee replacements using the Mako platform. Management remains very optimistic about capturing significant total knee replacement market share with the Mako platform. Neurotechnology and Spine sales increased 7.3% to $515 million. Stryker ended the quarter with $3.3 billion in cash and $7.2 billion in long-term debt taken on to finance acquisitions. During the quarter, Stryker generated $151 million in operating cash flow and $12 million in free cash flow, down 42% from last year’s first quarter, squeezed by working capital needs and a 21% jump in capital expenditures to $139 million. During the quarter, Stryker paid $159 million in dividends and bought back $230 million shares, mainly to offset dilution. Stryker affirmed 2017 guidance with organic sales growth in the range of 5.5% - 6.5% and adjusted EPS in the range of $6.35 - $6.45.

Biogen-BIIB reported first quarter revenues grew 3% to $2.8 billion with net income down 23% to $748 million and EPS off 22% to $3.46, negatively impacted by the $263 million settlement and licensing agreement with Forward Pharma . On a non-GAAP basis, EPS was up 9% over the prior year to $5.20. The launch of SPINRAZA, Biogen’s treatment for spinal muscular atrophy, is off to a promising start with first quarter revenues of $47 million. Cash and marketable securities decreased 26% during the quarter to $5.7 billion, with long-term debt decreasing 8% to $6.0 billion. During the first quarter of 2017, Biogen repurchased approximately 2 million shares of stock for a total value of $584 million. Since the end of the quarter, the Company has repurchased an additional 2 million shares for a total value of $543 million. Biogen announced an agreement with Bristol-Myers Squibb to exclusively license BMS-986168, an experimental medicine with potential in Alzheimer’s disease and progressive supranuclear palsy (PSP), a rare condition that affects movement, speech, vision, and cognitive function. Biogen anticipates making an upfront payment of $300 million to Bristol-Myers Squibb in the second quarter of 2017 as well as a near-term $60 million milestone payment to the former stockholders of iPierian, Inc. These amounts exceed the estimated $100 million in business development expense assumed in Biogen’s previously announced 2017 full year financial guidance.

Polaris-PII reported that first quarter sales increased 17% to $1.15 billion with a net loss of $2.9 million or $0.05 per diluted share, compared with net income of $46.9 million, or $0.71 per diluted share, for the prior year. The reported net loss included costs related to the wind down of Victory Motorcycles and certain Transamerican Auto Parts (TAP) integration and inventory step up costs taken in the first quarter. Adjusted net income for the first quarter excluding these costs, was $48.3 million, or $0.75 per diluted share.  Off-Road Vehicle and Snowmobile sales increased 2% during the quarter to $724.1 million in the face of ongoing softness in ORV retail sales in North American oil markets. Motorcycle sales decreased 35% in the first quarter to $120.3 million with Indian motorcycles up 11%, Slingshot sales constricted by the recall and Victory wind down.  Global Adjacent Market sales increased 24% to $91.6 million due mainly to the Taylor-Dunn acquisition. Sales in the new Aftermarket segment was $217.8 million with $202 million from the TAP acquisition. On the lower earnings, free cash flow decreased to $12 million. During the first quarter, the company paid $36 million in dividends and retired 256 thousand shares for approximately $21.8 million at an average price of about $85.15 per share. The company has 7.2 million shares remaining authorized for repurchase. Management maintained their EPS guidance for 2017 in the range of $4.25-$4.50 with 2017 sales up in the range of 10% to 13%. 

Express Scripts-ESRX reported first quarter revenue dipped .5% to $24.7 billion with net income up 3.8% to $546.3 million and EPS up 11.1% to $.90. Total adjusted claims processed declined 1% to 351.7 million with EBITDA per adjusted claim up 4% to $4.25. Free cash flow increased 42% in the first quarter to $1 billion with the company repurchasing $837 million of its own shares during the period. The overshadowing news of the quarter was management’s disclosure that Anthem, their largest client, has indicated that they will not renew their contract with Express Scripts when it expires in 2019. In 2016, Anthem contributed $17 billion, or 17%, to Express Scripts’ revenues as the company processed 219.6 million claims for Anthem, representing 16% of total claims processed. Anthem’s adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) was 30% of total EBITDA in 2016. Ongoing litigation continues with Anthem. While the loss of its largest customer is material to the company’s operations, management believes the outlook for its core pharmacy benefit management business with a diverse client base of more than 65 million members and volume of more than one billion adjusted prescriptions annually positions the company for continued success over the long term. Excluding Anthem, Express Scripts is targeting 2% to 4% compounded annual EBITDA growth from 2017 through 2020, which should continue to generate significant cash flow from operations. Management’s goal is to use 30% of the cash flow to repay debt with the balance to be used to fund internal growth, make strategic acquisitions and for share repurchases. Express Scripts increased its guidance for 2017 adjusted EPS from a range of $6.82 to $7.02 to a range of $6.90 to $7.04, which represents growth of 9% over 2016 adjusted EPS at the midpoint. Cash flow from operations is expected in the range of $4.7 billion to $5.2 billion for 2017, which represents a cash flow yield of nearly 14% based on the company’s current market capitalization. Client retention in 2018 is expected in the range of 95%-98%, which includes Anthem.

3M-MMM posted global sales of $7.7 billion, up 4% year-on-year, with net earnings increasing 4% to $1.3 billion and EPS up 5% to $2.16. First quarter growth was broad-based across all geographies, led by 10% organic local currency growth in Asia Pacific. EMEA (Europe, Middle East and Africa) sales increased 4%, Latin America/Canada sales gained 2.3% and U.S. sales nudged ahead 1.4%. By business segment, organic local-currency sales growth was 11.5% in Electronics and Energy, 5.7% in Industrial, 4.8% in Safety and Graphics, 3.1% in Health Care, with a decline of 1.2% in Consumer as inventory levels continue to adjust in the wake of office supply industry consolidation. Operating income was $1.8 billion and operating income margins for the quarter were 23.1%, down 100 basis points from last year due to an incremental $136 million of strategic investments in growth, productivity and portfolio actions. During the first quarter, 3M generated operating cash flow of $1 billion and free cash flow of $701 million, which was down 26% from last year’s first quarter, primarily due to a higher U.S. pension contribution. 3M returned $1.4 billion to shareholders during the quarter which included a 6% increase in the annual dividend to $702 million, marking the 59th consecutive year of annual increases for 3M shareholders. During the last five years, 3M has doubled its per share dividend. Given the strong start to the year, 3M raised its guidance and now forecasts organic local-currency sales growth to be 2% to 5%, up from previous guidance of 1% to 3%. 3M expects earnings in the range of $8.70 to $9.05 per share--up 7% to 11% year-on-year--versus a prior expectation of $8.45 to $8.80. This includes a $0.05 to $0.10 benefit from the gain on the pending sale of Identity Management, net of various investments to drive growth and improve productivity.  3M expects the $850 million sale of Identity Management (estimated $205 million in annual sales) to close during the second quarter.

Monday, April 24, 2017 Canadian National Railway-CNI reported first quarter revenues rolled 8% higher to C$3.2 billion with net income chugging 12% higher to C$884 million and EPS climbing 16% higher to C$1.16. Thanks to strong demand, CNI delivered record first-quarter volumes, including a 14% increase in Western Canadian grain tonnage. Revenue growth was broad-based during the quarter as revenue increased 39% for coal, 16% for grain and fertilizers, 16% for metals and minerals, 10% for automotive, 7% for intermodal and 1% for petroleum and chemicals, while revenues declined 3% for forest products.   Carloadings increased 9% to 1,386 thousand while rail freight revenue per carload decreased by 1%, but was up 1% on a constant currency basis.Revenue ton-miles (RTM), measuring the relative weight and distance rail freight transported by CNI, increased by 14%, but rail freight revenue per RTM decreased by 6% due to an increases in the average length of haul and foreign exchange headwinds. The company’s operating ratio increased .5% to 59.4% as operating expenses increased 9% during the quarter due in part to a 51% increase in fuel costs, volume-related costs and adverse winter conditions. Free cash flow increased 44% during the quarter to C$860 million due to higher income and lower capital expenditures compared to the prior year period. CNI paid C$313 million in dividends, a 10% increase over the prior year, and repurchased C$499 million of its shares during the quarter as part of a C$2 billion buyback program. Given the solid start to the year, management raised their outlook for the full year of 2017 with adjusted EPS now expected in the range of C$4.95 to C$5.10, representing 8% to 11% growth over last year’s adjusted EPS. CNI also increased its capital expenditure program by C$100 million to C$2.6 billion to go towards the purchase of 22 high-horsepower locomotives and other projects to support growth.

Becton, Dickinson and Company-BDX announced an agreement to acquire C. R. Bard, a medical technology leader in the fields of vascular, urology, oncology and surgical specialty products, for $317.00 per Bard common share in cash and stock, for a total consideration of $24 billion. The combination will create a highly differentiated medical technology company uniquely positioned to improve both the process of care and the treatment of disease for patients and healthcare providers. The transaction will build on BD's leadership position in medication management and infection prevention with an expanded offering of solutions across the care continuum. Additionally, Bard's strong product portfolio and innovation pipeline will increase BD's opportunities in fast-growing clinical areas, and the combination will enhance growth opportunities for the combined company in non-U.S. markets. This  transaction will be immediately accretive and is expected to generate high-single digit accretion to adjusted earnings per share (EPS) in fiscal year 2019.  Approximately $300 million of estimated annual, pre-tax, run-rate cost synergies are expected by fiscal year 2020.  Separately, BD also expects to benefit from revenue synergies beginning in fiscal year 2019. The transaction is expected to improve BD's gross margins by approximately 300 basis points in fiscal year 2018, increase BD's earnings per share growth trajectory to the mid-teens, and generate strong cash flow. The combined company will have a large and growing presence in emerging markets, including $1 billion in annual revenue in China. Under the terms of the transaction, Bard common shareholders will be entitled to receive approximately $222.93 in cash and 0.5077 shares of BD stock per Bard share, or a total of value of $317.00 per Bard common share based on BD's closing price on April 21, 2017. At closing, Bard shareholders will own approximately 15 percent of the combined company. BD expects to contribute approximately $1.7 billion of available cash to fund the transaction, along with, subject to market conditions, approximately $10 billion of new debt and approximately $4.5 billion of equity and equity linked securities issued to the market. Bard shareholders will also receive $8 billion of BD common stock. BD has also obtained fully committed bridge financing. At closing, BD estimates the combined company will have pro forma leverage of approximately 4.7x and is committed to deleveraging to below 3.0x leverage within three years of closing. BD expects to continue the suspension of its share repurchase program. BD is also committed to annual dividend increases while reinvesting in the business to continue to drive long-term growth. 

Friday, April 21, 2017 Gentex-GNTX reported first quarter revenues increased 12% to $453.5 million with net earnings motoring 22% higher to $97.5 million and EPS up 18% to $.33. Auto sales growth of 13% during the quarter to $445.6 million was driven by a 12% increase in auto-dimming mirror unit shipments compared to 3% growth in relevant light vehicle production. Other sales, which includes dimmable aircraft windows and fire protection products, declined 33% to $7.9 million. Gross margin dipped 30 basis points to 38.8% during the quarter as the result of annual customer price reductions, which were partially offset by purchasing cost reductions and favorable product mix. Higher investment income and a lower tax rate led to the strong net earnings growth in the quarter. During the quarter, Gentex repurchased 1.5 million of its shares with 5.3 million shares remaining authorized for future share repurchases. The company paid down $40 million on its revolver loan with the goal of paying down its debt early thanks to its strong cash flow generation. The company ended the quarter with $798 million in cash and investments, representing approximately $2.78 per share in cash. Global light vehicle production is expected to increase 1% for the full 2017 year. As a result, Gentex is maintaining its revenue guidance for 2017 of $1.78 to $1.85 billion with gross margin expected in the 39% to 40% range.

Thursday, April 20, 2017 Qualcomm-QCOM reported second quarter revenues declined 10% to $5 billion with net income and EPS each down 36% to $749 million and $.50, respectively. These results included a $947 million reduction in revenues, or $.48 per share, which was related to the BlackBerry arbitration settlement and an $868 million, or $.49 per share charge, related to the Korea Free Trade Commission investigation. In addition, due to ongoing litigation with Apple, Apple’s contract manufacturers reported, but underpaid, royalties to Qualcomm in the second quarter equal to the $1 billion that Qualcomm has not paid Apple under the disputed agreement. Qualcomm is battling litigation on many fronts as it protects the value of their technologies which enables today’s robust mobile communications ecosystem.  With leading technologies and the pending $38 billion acquisition of NXP which is expected to close by the end of 2017, management believes they are well positioned to address a larger set of growth opportunities ahead than at any other time in their history. On a non-GAAP basis, excluding the litigation settlements and other items, Qualcomm reported revenues increased 8% to $6 billion with net income up 28% to $2 billion and EPS up 29% to $1.34 thanks to healthy growth across the QTL licensing and QCT semiconductor businesses, especially in the automotive, networking and IoT (Interent of Things) growth areas. During the second quarter, total reported device sales increased 18% to $82.6 billion with estimated reported 3G/4G device shipments up 19% to 398 million to 402 million with average selling price in the range of $204-$210. At the end of the quarter, Qualcomm held $28.9 billion in cash and $9.9 billion in long-term debt. During the first half of fiscal 2017, Qualcomm’s free cash flow declined 40% to $1.9 billion due to lower earnings with the company paying out $1.6 billion in dividends and repurchasing $727 million of its own shares. The company has $2.3 billion remaining authorized for future share repurchases. Cumulatively, Qualcomm has returned $56.4 billion to shareholders through dividends and share repurchases. Given the uncertainty related to the Apple dispute, Qualcomm’s outlook for the third quarter in unusually wide with revenues expected in the range of $5.3 billion to $6.1 billion, representing a decline of 12% to an increase of 1% with EPS expected in the range of $.67-$.92, representing a decline of 5% to 31% with the decline in earnings primarily attributable to acquisition-related items.

Wednesday, April 19, 2017 Genuine Parts-GPC reported first quarter sales motored ahead 5% to $3.9 billion with net income up 1% to $160 million and EPS up 3% to $1.08. First quarter sales growth was the strongest quarterly growth since the fourth quarter of 2014, driven by high-single-digit growth in international automotive, industrial and office supply, partially offset by sluggish U.S. automotive sales.  By segment, Automotive sales increased 3% to $2 billion on a 0.5% comp store increase. U.S. automotive sales, which accounted for 70% of the segment’s sales, increased 1% year-over-year with comp store sales dipping 1% in the wake of mild winter weather in the Northeast. International Automotive sales increased 8% on 4% comp store sales growth. Industrial sales powered ahead 7% to $1.2 billion, marking the strongest growth since the fourth quarter of 2014, thanks to the increase in domestic industrial production and a rebound in the energy patch. Office Products sales increased 9% to $519 million, boosted by 11% growth from acquisitions in the fast-growing Facility, Breakroom and Safety market partly offset by a 2% decline in traditional office supply sales.  Electrical segment sales increased 5% to $184 million on a 2.5% comp store sales increase. Operating margins dipped 40 basis points to 6.2%, squeezed by deleveraging from domestic auto parts and traditional office products sales, acquisition costs and increased IT spending. During the quarter, Genuine Parts generated free cash flow of $77 million, down 38% year-over-year, on a jump in working capital needs and capital expenditures. During the quarter, the company repurchased 1 million shares for $92 million with 3.2 million shares remaining authorized for repurchase. Genuine Parts announced its 61st consecutive annual dividend increase with the 2017 dividend up 3% from 2016 to $2.70 per share, representing 57% of 2016 EPS. Given the strong first quarter performance which is expected to progressively improve throughout the year, management raised its 2017 EPS guidance to $4.75 - $4.85 from prior guidance of $4.70 - $4.80. Sales growth is expected in the +3% to +4% range.

Abbott-ABT reported first quarter revenues rose 29.7% to $6.3 billion with net earnings up 32.5% and EPS from continuing operations of $.22 versus $.04 in the prior year period. These results reflect the acquisition of St. Jude Medical, which occurred on Jan. 4, 2017 and provides Abbott with expanded opportunities for future growth in the medical device arena. The integration of St. Jude Medical is going well despite a recent FDA warning letter regarding quality control at one of the manufacturing sites, which Abbott is addressing. Adjusting for acquisitions and divestitures and other special items, sales on a comparable operational basis increased 3.2% during the quarter with adjusted EPS up 17.1% to $.48, above management’s guidance due primarily to timing of certain expenses. Abbott has market leadership positions in all of its business units with business segment sales of $1.2 billion in Diagnostics during the first quarter which increased 4.7% on an operational basis; Medical Devices sales of $2.4 billion which increased 4.5% on a comparable operational basis; Nutrition sales of $1.6 billion which declined 1%; and Established Pharmaceutical sales of $950 million, which increased 5.7%. Challenging conditions in the Chinese infant formula market continued to impact international Nutrition performance contributing to the decline in that segment’s sales during the quarter.  During the first quarter, Abbott received FDA approval for MRI-conditioning labeling for both the Assurity MRI pacemaker and the Tendril MRI pacing lead. Abbott launched its new Ensite Precision cardiac mapping system, which helps physicians more effectively treat patients experiencing arrhythmias in the heart. Abbott released real-world data from 50,000 users of its sensor-based FreeStyle Libre glucose monitoring system. The data showed that FreeStyle Libre use was associated with higher frequency of glucose testing and better diabetes outcomes, including improved control of glucose levels. For the full year 2017, Abbott expects revenues to grow at a mid-single digit rate with GAAP EPS in the range of $.92-$1.02 and non-GAAP EPS in the range of $2.40-$2.50, representing double-digit growth. This outlook does not include results from the pending Alere acquisition, which is expected to close in the third quarter of 2017.

Genuine Parts-GPC agreed to acquire Merle's Automotive Supply (Merle's), with an effective close date of May 1, 2017.  Merle's, founded in 1969 and based in Tucson, Arizona, is a 14 location automotive parts distributor serving both the commercial and retail markets in the greater Tucson and southern Arizona area.  Merle's is expected to generate approximate annual revenues of $45 million.   Paul Donahue, GPC President and Chief Executive Officer, stated, "Merle's is a leading automotive distributor in the greater Tucson area, and this strategic acquisition significantly enhances our automotive store footprint and competitiveness in the Arizona marketplace.  We are excited to welcome the Merle's team to the U.S. Automotive Parts and GPC family and look forward to working with them and continuing our shared tradition of providing quality parts and excellent service to our customers."

Tuesday, April 18, 2017 Johnson & Johnson-JNJ reported first quarter sales rose 1.6% to $17.8 billion with net income dipping .8% to $4.4 billion and EPS up 1.3% to $1.61. Excluding the net impact of acquisitions and divestitures, on an operational basis worldwide sales increased 1.2% with domestic sales dropping .7% and international sales increasing 3.4%. Adjusting earnings to exclude intangible amortization and special items, net earnings increased 3.8% with EPS up 5.8%. On an operational basis, worldwide consumer sales of $3.2 billion decreased 2.3% due to a consumer slowdown in the U.S. impacted by higher gas prices and delayed tax refunds and a slowdown in international consumer sales due to inflation in Latin America and macro factors in Asia. JNJ expects consumer sales to rebound for the balance of the year. On an operational basis, worldwide pharmaceutical sales of $8.2 billion increased 2.2%, driven by new products and the strength of core products. The acquisition of Actelion, a leading biopharmaceutical company, for $30 billion is expected to close in the second quarter and be accretive to earnings. Worldwide medical devices sales of $6.3 billion increased 1.7% on an operational basis driven by electrophysiology products in the cardiovascular business, Acuvue contact lenses in the vison care business and endocutters in the advanced surgery business, partially offset by declines in the diabetes business. Operating income increased 5.3% during the first quarter due to good cost management and a larger net gain in other income. The operating margin is expected to remain stable or increase slightly for the full year. A higher effective tax rate led to the dip in net earnings for the quarter, while lower shares outstanding resulted in the increase in EPS. JNJ expects to complete its current share buyback program in the second quarter. The company ended the quarter with net cash of $7 billion ($39 billion in cash less $32 billion in long-term debt). Management raised their sales and earnings outlook for the full year 2017 to reflect the pending acquisition of Actelion with reported sales expected to be in the $75.4-$76.1 billion range, representing 4.8% to 5.8% growth, and reported EPS expected in the range of $7.00-$7.15, representing 4% to 6.2% growth.  

Friday, April 14, 2017 With today's approval of Apple’s-AAPL application to test vehicles in autonomous technology mode on California public roads, Apple officially enters the race with Alphabet-GOOGL, Tesla, BMW, Baidu, GM and 24 others to create the next generation car.  Apple first publicly announced its intention to develop the technology in December when Steve Kenner, Apple’s director of product integrity, wrote to the head of the National Highway Traffic Safety Administration stating that Apple “is investing heavily in the study of machine learning and automation, and is excited about the potential of automated systems in many areas, including transportation.”

Abbott-ABT and Alere announced today that the companies have agreed to amend the existing terms of their agreement for Abbott's acquisition of Alere. Under the amended terms, Abbott will pay $51 per common share to acquire Alere, for a new expected equity value of approximately $5.3 billion, reduced from the originally expected equity value of approximately $5.8 billion. The transaction is expected to close by the end of the third quarter of 2017. Additionally, the companies have agreed to dismiss their respective lawsuits. On Feb. 1, 2016, Abbott and Alere announced a definitive agreement for Abbott to acquire Alere, the global leader in point of care diagnostics, which will significantly expand Abbott's global diagnostics presence and leadership. Point of care testing is a $5.5 billion segment and one of the fastest growing in vitro diagnostics segments, in part, because many health care systems are increasing their reliance on these easy-to-use, quick, accurate technologies to inform patient care decisions. 

Thursday, April 13, 2017 Biogen-BIIB announced an agreement to exclusively license BMS-986168, a Phase 2-ready experimental medicine with potential in Alzheimer’s disease (AD) and progressive supranuclear palsy (PSP), from Bristol-Myers Squibb (BMY). BMS-986168 is an antibody targeting extracellular tau, the protein that forms the deposits, or tangles, in the brain associated with AD and other neurodegenerative tauopathies such as PSP. PSP is a rare and devastating condition that affects movement, speech, vision, and cognitive function. Biogen plans to rapidly initiate Phase 2 studies for BMS-986168 in both AD and PSP. The addition of BMS-986168 to Biogen’s pipeline signifies both a broader commitment to rare neurodegenerative diseases as well as a strengthened focus on AD, a condition that affects millions of patients and families. With an expanded AD pipeline that includes a range of anti-tau and anti-amyloid candidates as well as a BACE inhibitor program, Biogen is targeting multiple mechanisms implicated in the disease. Under the agreement, Biogen will receive worldwide rights to BMS-986168. Biogen will be responsible for the full development and global commercialization of BMS-986168 in AD and PSP. Bristol-Myers Squibb will receive an upfront payment of $300 million from Biogen and may receive up to $410 million for additional milestone payments and potential royalties. Biogen will also assume all remaining obligations to the former stockholders of iPierian, Inc. related to Bristol-Myers Squibb’s acquisition of the company in 2014. Biogen may pay up to $550 million in remaining milestones plus royalties including a near term $60 million milestone.

Wednesday, April 12, 2017 Fastenal-FAST reported solid first quarter results with revenues up 6% to $1 billion and net earnings and EPS each also up 6% to $134.2 million and $.46, respectively. This was the strongest first quarter in two years as industrial demand is improving. The increase in sales was driven by higher unit sales, resulting from increases in sales at existing locations, growth in the industrial vending business and growth in new and existing Onsite locations. Sales of fastener products, representing 35.6% of total sales, grew .8% while sales of non-fastener products, representing 64.4% of total sales, grew 9.4% during the quarter. Gross profit declined 40 basis points to 49.4% in the first quarter due primarily to a change in customer and product mix. Total full-time equivalent headcount dipped 1.7% to 16,756 at quarter end. During the quarter, Fastenal signed 5,437 industrial vending machines, an increase of 17% over the prior year period with the goal of signing 22,000 to 24,000 vending machines for the full year. Net sales through the vending machines continued to grow at a double-digit pace. The company’s Onsite locations increased 33% during the quarter to 64 locations. Fastenal also signed 43 new national account contracts during the quarter, representing 48% of total revenues with national account sales increasing 9% during the quarter. The improving pace of business with national accounts benefited from the pick up in industrial demand, especially for oil and gas sector customers. On the last day of the quarter, Fastenal acquired Manufacturers Supply Company (Mansco) for $57.9 million.  Mansco is an industrial distributor that is generating $50 million in revenue.  Fastenal’s free cash flow increased 38% during the first quarter to $189.2 million, thanks to improved earnings and lower capital expenditures. Fastenal paid $92.6 million in dividends during the quarter. Management is encouraged by improving customer business activity which should benefit the balance of the year.

Qualcomm-QCOM announced a binding interim arbitration award requiring Qualcomm to refund a sum of $814.9 million, plus interest and attorneys' fees, to BlackBerry related to royalties for certain past sales of subscriber units.  The parties had agreed to arbitrate a contract dispute relating to one specific issue: whether Qualcomm's voluntary per unit royalty cap program applied to BlackBerry's non-refundable prepayments of royalties for sales of a specified number of subscriber units from 2010 through the end of 2015. While Qualcomm does not agree with the decision, it is binding and not appealable.  The arbitration decision was limited to prepayment provisions unique to BlackBerry's license agreement with Qualcomm and has no impact on agreements with any other licensee.

Tuesday, April 11,2017 Qualcomm-QCOM filed its Answer and Counterclaims to the January lawsuit brought by Apple-AAPL against the Company in the U.S. District Court for the Southern District of California.  Qualcomm's filing details the value of the technologies Qualcomm has invented, contributed and shared with the industry through its licensing program, as well as Apple's failure to engage in good faith negotiations for a license to Qualcomm's 3G and 4G standard essential patents on fair, reasonable and non-discriminatory terms. The filing also outlines how Apple breached agreements and mischaracterized agreements and negotiations with Qualcomm; interfered with Qualcomm's long-standing agreements with Qualcomm licensees that manufacture iPhones and iPads for Apple; encouraged regulatory attacks on Qualcomm's business in various jurisdictions around the world by misrepresenting facts and making false statements; chose not to utilize the full performance of Qualcomm's modem chips in its iPhone 7, misrepresented the performance disparity between iPhones using Qualcomm modems and those using competitor-supplied modems; and threatened Qualcomm in an attempt to prevent it from making any public comparisons about the superior performance of the Qualcomm-powered iPhones. Qualcomm seeks, among other things, damages from Apple for reneging on its promises in several agreements and to enjoin Apple from further interference with Qualcomm's agreements with the companies that manufacture iPhones and iPads for Apple.

Thursday, April 6, 2017 Wabtec-WAB has acquired Thermal Transfer Corp., a supplier of industrial heat exchangers. The company has annual sales of about $25 million. Thermal Transfer manufactures heat exchangers and related components for a variety of industrial markets. The majority of its sales are in the U.S. and in the aftermarket.

Wednesday, April 5, 2017 Walgreens Boots Alliance-WBA rang up second fiscal quarter sales of $29.4 billion, down 2.4% year-over-year, with net earnings of $1 billion, up 14%, and EPS of $.98, up 15%. Retail Pharmacy USA sales increased 1.5% to $21.8 billion as comp store sales increased 2.4% from last year’s second quarter. Pharmacy sales, which accounted for 66.5% of the division’s sales in the quarter, increased 3.7% on a 4.2% jump in comp store sales, primarily due to volume increases. The division filled 246.7 million prescriptions, up nearly 6% from last year. Prescriptions filled in comparable stores increased 8%, the highest comp growth in more than seven years, thanks to Medicare Part D growth and volume growth from previously announced strategic partnerships. Market share growth increased 100 basis points from last year to 20.4%. U.S. retail sales declined nearly 3% on an .8% dip in same store sales as declines in general merchandise and personal care were partially offset by solid growth in the health and wellness and beauty categories. Walgreens continued its efforts to boost retail sales by expanding and revamping its beauty offerings in 2,000 stores last year with 1,000 more expected this year. Retail Pharmacy International sales of $3.1 billion fell 14.5% on a 3.7% comp store decline, hurt by foreign currency translation and lower pharmacy funding by the U.K.’s National Health Service. On a constant currency basis, Retail Pharmacy International sales dipped 1.9%. Pharmaceutical Wholesale sales declined 10.6% to $5 billion, squeezed by foreign currency translation. On a constant currency basis Pharmaceutical Wholesale same store sales increased 5% year-over-year.  Walgreens Boots Alliance operating income during the second quarter fell 20% to $1.5 billion. Excluding equity earnings from AmerisourceBergen, adjusted operating income increased 8.4% on a constant currency basis, boosted by $1.5 billion in cost savings. Year-to-date free cash flow increased 13% to $2.7 billion. During the first half of the fiscal year, the company returned $1.3 billion to shareholders through cash dividends of $817 million and shares buybacks of $457 billion. Walgreens Boots Alliance announced a new $1 billion share buyback, initiated in response its to robust free cash flow and the revised consideration for Rite Aid merger, which now is expected to close by the end of July. Management maintained its fiscal 2017 guidance of adjusted EPS of $4.90 to $5.08.  

Monday, April 3, 2017 FactSet-FDS announced that it has completed its acquisition of the Interactive Data Managed Solutions business (IDMS) from Intercontinental Exchange. With a client base of more than 700 financial institutions across Europe and the United States, IDMS is a leading managed solutions and portal provider helping clients adapt to the wealth industry’s digital transformation. The last twelve months revenues, as of February 28, 2017, for the IDMS business were $68 million. IDMS is expected to be accretive by $0.03 to adjusted diluted EPS for FactSet’s fiscal 2017.

UPS-UPS for the first time offers Saturday ground delivery and Saturday pickup services, delivering shippers industry-leading Saturday choices. The time-in-transit improvement is one of the largest in the company’s 109-year-history. This planned expansion is expected to create more than 6,000 new UPS jobs nationwide when operations are fully implemented by the end of 2018.

Walgreens-WBA and pharmacy benefit manager Prime Therapeutics LLC  announced the closing of their transaction to form a combined central specialty pharmacy and mail services company, as part of a strategic alliance first announced by the companies last August.

Thursday, March 30, 2017 AbbVie-ABBV announced that the U.S. Food and Drug Administration (FDA) approved the inclusion of moderate to severe fingernail psoriasis data in the HUMIRA® (adalimumab) prescribing information for patients with moderate to severe chronic plaque psoriasis. HUMIRA is now the first-and-only biologic treatment with data on fingernail psoriasis in its U.S. prescribing information. Fingernail psoriasis affects half of all psoriasis patients. It is a form of chronic plaque psoriasis characterized by pitting, deformation, thickening, discoloration, pain and separation of the nail from the nail bed. Nail psoriasis can also contribute to social stigmatization and impact quality of life.

Genuine Parts-GPC and Inenco Group announced that they have entered into a definitive strategic agreement whereby Inenco will issue new shares to Genuine Parts Company, representing a 35% stake in Inenco for approximately $70 million (US$) in cash.  The effective date of the investment is April 3, 2017. Inenco Group, founded in 1954 and headquartered in Sydney, Australia, is one of Australasia's leading industrial distributors of key product categories such as bearings, power transmission and seals.  It has 161 locations across Australia and New Zealand as well as an emerging presence in Asia, and generates estimated annual revenues of approximately $325 million (US$). The parties have agreed to a structure by which Genuine Parts Company will have the opportunity to acquire the remaining 65% stake in Inenco at a later date, subject to certain conditions being satisfied.

Wednesday, March 29, 2017 Paychex-PAYX reported third quarter revenues rose 6% to $795.8 million with net income and EPS each clocking in 12% gains to $202.5 million and $.56, respectively. Payroll service revenue increased 2% to $446.6 million driven mainly by growth in revenue per check and the client base. Human Resource Services revenue increased 12% to $336 million with time and attendance services reflecting double-digit growth. Interest on funds held for clients jumped 11% to $13.2 million thanks to slightly higher interest rates earned due to the Fed rate increases, which will be more accretive in fiscal 2018. Operating margin expanded from 37.2% to 38.5% during the quarter thanks to solid expense control while a lower tax rate also helped boost double-digit net income growth. Return on shareholders’ equity over the last 12 months was a sterling 41%.  Paychex’s financial position remains strong with cash and investments topping $844 million and no long-term debt on its stalwart balance sheet as of quarter end. Free cash flow dipped 3% year-to-date to $702.5 million due primarily to working capital fluctuations. During the first nine months, Paychex has paid $496.9 million in dividends and repurchased 2.9 million of its shares for $166.2 million at an average price of approximately $57.31 per share. For the full fiscal 2017 year, management expects total service revenues to increase in the range of 7% to 8% generating a 7% increase in net income. The company is encouraged by the growing confidence in the small business environment and remains well positioned to assist their clients address future changes in the political and regulatory landscape.

Tuesday, March 28, 2017 FactSet-FDS reported second quarter revenues rose 4% to $294.4 million with net income down 2% to $66.7 million and EPS up 3% to $1.68. Excluding the Market Metrics business which was sold, organic revenues grew 7% with adjusted net income up 9% and adjusted EPS up 14%. U.S. revenues increased 1% to $191.6 million and increased 6% organically. International revenues increased 12% to $102.7 million and grew 9%, excluding acquisitions, dispositions and the impact of foreign exchange. Annual Subscription Value (ASV) increased 4% to $1.19 billion as of Feb. 28, 2017 with organic ASV up 6.5%. Annual client retention was greater than 95% of ASV and when expressed as a percentage of clients, annual retention was 93%. Free cash flow declined 20% during the first half of the year to $110 million due primarily to working capital changes with the company paying $40 million in dividends and repurchasing $166 million of its shares including 480,000 shares in the second quarter for $81.1 million at an average cost of $169.03 per share. The Board of Directors authorized a $300 million expansion of the share repurchase program with $336.5 million now available for future share repurchases. Over the last six years, FactSet has returned 94% of free cash flow to shareholders through dividends and share repurchases.   FactSet recently completed two acquisitions of BISAM for $205.2 million in cash and Interactive Data Managed Solutions (IDMS) with terms not disclosed. BISAM is expected to be accretive by $.02 per share to adjusted 2017 EPS and dilutive by $.06 per share to GAAP EPS with IDMS expected to have an immaterial impact on 2017 EPS.  Management’s outlook for the fiscal third quarter is for revenues in the range of $301 million to $307 million, representing 6% growth at the midpoint, and EPS in the range of $1.68 to $1.74 with adjusted EPS expected in the range of $1.80 to $1.86, representing 12% growth at the midpoint.

Thursday, March 23, 2017 The Walt Disney Company-DIS Board of Directors announced extended Robert A. Iger’s contract as Chairman and Chief Executive Officer to July 2, 2019. 

Accenture-ACN reported second quarter revenues rose 5% in U.S. dollars and 6% in local currency to $8.3 billion with net income down 37% to $839 million and EPS off 36% to $1.33. Last year’s results included a $.74 per share gain on the sale of Navitaire. Excluding this gain, EPS was down 1% for the quarter primarily due to a higher tax rate. Operating income during the second quarter rose 5% to $1.14 billion with an operating margin of 13.7% unchanged from the prior year. New bookings for the quarter were $9.2 billion evenly divided between consulting bookings and outsourcing bookings. Revenue growth was broad-based across operating groups and geographies, led by 14% growth in Products and 12% growth in Growth Markets. New, high-growth areas such as digital, cloud and security services now account for more than 45% of total revenues and are growing at double-digit rates. Free cash flow increased 37% during the first half of the year to $1 billion. Accenture spent $829 million on 16 acquisitions during the first half while paying $785 million in dividends and repurchasing 12 million of its own shares for $1.4 billion at an average price of $116.67 per share. Accenture has $4.3 billion remaining authorized for future share repurchases. The company ended the quarter with more than $3.4 billion in cash and investments and minimal long-term debt on its strong balance sheet. For fiscal 2017, Accenture expects net revenue growth to be in the range of 6% to 8% in local currency with EPS in the range of $5.31-$5.48, which includes the impact of a non-cash pension settlement charge of $.39 per share. For fiscal 2017, the company continues to expect free cash flow to be in the range of $4.0 to $4.3 billion with acquisitions for the full year earmarked at $1.5 billion, which is expected to contribute 2% to growth.

Wednesday, March 22, 2017 Starbucks-SBUX hosted its 25th Annual Meeting of Shareholders and honored the accomplishments of the company in delivering record financial results, including approximately 18,000% in shareholder returns since the company’s Initial Public Offering 25 years ago, and more than $10 billion in cash distributed to shareholders via dividends and share repurchases over the past five years alone. Starbucks highlighted its strong pipeline of innovation for future growth across coffee, tea, food, digital, China and partner investments. Starbucks announced plans to create more than 240,000 new jobs globally (68,000 in the U.S.) as it reiterates intent to open 12,000 new stores globally and 3,400 new stores in the U.S. by FY21, including 100 more Military Family Stores in the U.S. to support military communities.  Opened in 2014, Starbucks first Roastery located in Seattle is already serving as a foundation for the company’s coffee innovation pipeline, providing a halo to the rest of the business. This premium coffee pipeline will continue to expand as the company opens Roastery locations in Shanghai (2017), New York (2018), Milan (2018) and Tokyo (2018) with the potential for 20-30 Roasteries globally over time.  Building on its food business through customer-driven innovation, the company plans to launch Starbucks Mercato, a new menu of lunch items that features fresh and flavorful grab-and-go salads and sandwiches that meet a variety of dietary lifestyles and are made daily, with leftover items donated nightly to local food banks through Starbucks FoodShare program with Feeding America. The Mercato menu will start with more than 100 stores in Chicago with plans to expand to other U.S. markets in the future. Starbucks continues to offer the largest and most robust mobile ecosystem of any retailer in the world, with over 13 million Starbucks Rewards members, approximately 9 million mobile paying customers, with one out of three now using Mobile Order & Pay, and more than $6 billion loaded onto prepaid Starbucks Cards in North America during 2016 alone. In China, customers have continued to embrace the Starbucks brand, with some of the company’s most innovative, efficient and profitable stores producing record revenue and strong same-store sales growth in FY16. Starbucks now operates more than 2,600 stores in 127 cities in China and employs nearly 40,000 partners, opening over a store a day – a growth rate that will continue to accelerate well into the future.

Tuesday, March 21, 2017 Nike-NKE reported fiscal third quarter revenues rose a solid 5%, or 7% on a constant currency basis, to $8.4 billion with net income jumping 20% to $1.1 billion and EPS scoring 24% growth to $.68. Consumer demand in all geographies drove NIKE Brand revenue growth to $7.9 billion led by double-digit growth in Western Europe, Greater China and the Emerging Markets. International revenues now account for more than 50% of total revenues and are growing at double-digit rates.  This was the 14th consecutive quarter of double-digit growth in Western Europe and the 11th consecutive quarter of double-digit growth in China, which represents a “massive” long-term growth opportunity. Nike is celebrating its 20th anniversary in China, which enjoys a rapidly growing sports culture. Revenues for Converse were $498 million, up 3% on a constant currency basis, driven by growth in North America.  EPS grew faster than sales primarily due to selling and administrative expense leverage, higher other income, a lower effective tax rate and a lower average share count which more than offset a lower gross margin. Return on invested capital for the trailing 12 months was greater than 33%.  Inventories rose 7% to $4.9 billion compared to the prior year as a 3% decline in NIKE Brand wholesale unit inventories was offset by increases in average product costs per unit and higher inventories associated with 13% growth in direct to consumer sales. Cash and short-term investments were $6.2 billion at quarter end, up $1.1 billion compared to the prior year period due to growth in net income and the proceeds from the issuance of debt in the second fiscal quarter of 2017, which more than offset share repurchases, higher dividends and investments in infrastructure. During the third quarter, Nike repurchased 8.9 million shares for approximately $475 million at an average cost of about $53.37 per share. The company has $8.4 billion remaining authorized for future repurchases as part of the four-year $12 billion repurchase program approved in November 2015. Worldwide futures orders were down 4% or 1% on a constant currency basis. Management’s outlook for the fourth quarter is for mid-single digit growth in revenues, or high-single digit growth on a constant currency basis. Gross margin is expected to contract 150-175 basis points primarily due to adverse foreign exchange with selling and administrative expenses expected to be flat. For fiscal 2018, Nike expects revenue growth across all geographies with expanding profitability. However, foreign exchange will remain a significant headwind due to the strong dollar, which has resulted in $1.6 billion to $2 billion of headwinds on EPS growth in the 2016-2018 time period, with the biggest impact expected in 2018. Management will continue to work hard to mitigate these headwinds.

Apple®-AAPL updated its most popular-sized iPad®, featuring a brighter 9.7-inch Retina® display and best-in-class performance at its most affordable price ever, starting at $329 (US). Designed for unmatched portability and ease of use, along with incredible performance and all-day battery life, iPad is the world’s most popular tablet and the primary computing device for millions of customers around the world. Through the more than 1.3 million apps designed specifically for iPad, customers can do even more, from learning to code with Swift Playgrounds™ and reading books on the large screen to boosting productivity through Microsoft Office and using multitasking features like Split Screen. Apple® also introduced Clips, a new app that makes it quick and fun for anyone to create expressive videos on iPhone® and iPad®. The app features a unique design for combining video clips, photos and music into great-looking videos to share with friends through the Messages app, or on Instagram, Facebook and other popular social networks. Apple® also announced iPhone® 7 and iPhone 7 Plus (PRODUCT)RED Special Edition in a vibrant red aluminum finish, in recognition of more than 10 years of partnership between Apple and (RED). This gives customers an unprecedented way to contribute to the Global Fund and bring the world a step closer to an AIDS-free generation.

Monday, March 20, 2017 Disney’s-DIS “Beauty and the Beast” movie opened to $170M domestically and $180 million overseas.  This is a record opening for a family film and a record March open. “Beauty and the Beast” is on track to cross $1 billion worldwide compared to a reported $160 million budget. Nothing beastly about those beautiful numbers!

FactSet-FDS acquired BISAM Technologies S.A. for $205.2 million from Aquiline Capital Partners and company insiders. With more than 160 employees worldwide, BISAM is a leading provider of portfolio performance and attribution, multi-asset risk, GIPS composites management and reporting. FactSet borrowed $575 million under a new revolving credit facility to fund the transaction and repay existing debt. BISAM’s annual revenues as of December 31, 2016 were over $28 million. The transaction is expected to be accretive by $0.02 to adjusted diluted EPS and dilutive by $0.06 to GAAP diluted EPS for the remainder of fiscal 2017.

Thursday, March 16, 2017 3M-MMM announced that it has entered into a definitive agreement to acquire Scott Safety from Johnson Controls for a total enterprise value of $2.0 billion. Scott Safety is a premier manufacturer of innovative products, including self-contained breathing apparatus (SCBA) systems, gas and flame detection instruments, and other safety devices that complement 3M’s personal safety portfolio. Scott Safety’s products help protect firefighters, industrial workers, police, military, homeland security forces, and rescue teams around the world from environmental hazards. The business had annual revenues in 2016 of approximately $570 million. On a GAAP reported basis, 3M estimates the acquisition to be $0.10 dilutive to earnings in the first 12 months following completion of the transaction. Excluding purchase accounting adjustments and anticipated one-time expenses related to the transaction and integration, 3M estimates the acquisition to be $0.10 accretive to earnings over the same period. The transaction is expected to close in the second half of 2017. 3M will finance the transaction through a combination of cash and debt.

Wednesday, March 15, 2017 Oracle-ORCL reported third quarter total revenues rose 2% to $9.2 billion with net income up 5% to $2.2 billion and EPS up 6% to $.53. Cloud software as a service (SaaS) and platform as a service (PaaS) revenue jumped 73% during the quarter to $1 billion with total cloud revenues up 62% to $1.2 billion as cloud infrastructure as a service (IaaS) revenue rose 17% to $178 million. New software licenses declined 16% to $1.4 billion as customers are increasingly shifting their business to the cloud. Software license updates and product support revenue was up 2% to $4.8 billion. Total hardware revenue declined 9% to $1 billion with total service revenue up 2% to $812 million. The “hyper-growth” in the cloud has rapidly driven the company’s SaaS and PaaS businesses to scale with the total cloud business reaching the $5 billion annualized revenue mark. The cloud business is beginning to overtake the software licensing business, with the higher cloud margins expected to result in earnings and cash flows growing faster than sales in the years ahead. Short-term deferred revenue grew 7% year over year to $7.4 billion. Operating cash flow on a trailing 12-month period was $13.5 billion. Free cash flow declined 8% year-to-date to $8.2 billion primarily due to the timing of working capital changes. Fiscal year-to-date, Oracle has paid $1.8 billion in dividends and repurchased $3.1 billion of its shares. Oracle announced that its board of directors increased the quarterly dividend 27% from $.15 per share to $.19 per share. Total revenue for the fourth quarter is expected to range from a 1% decline to a 2% gain, with SaaS and PaaS revenue growing 69% to 73% and IaaS revenue growth accelerating to 25% to 29%. Earnings per share are expected in the range of $.78 to $.82 on a constant currency basis in the fourth quarter with EPS expected to grow at double-digit rates in fiscal 2018.

UPS-UPS announced plans to build an additional six compressed natural gas (CNG) fueling stations and add 390 new CNG tractors and terminal trucks and 50 liquefied natural gas (LNG) vehicles to its alternative fuel and advanced technology fleet. UPS further cements its leadership in the alternative fuel market while continuing to reduce its environmental footprint with this more than $90 million investment in natural gas.

Tuesday, March 14, 2017 Cognizant Technology Solutions-CTSH announced that it has entered into accelerated share repurchase ("ASR") agreements with Barclays Bank PLC, Citibank N.A., and UBS AG, London Branch to repurchase an aggregate of $1.5 billion of Cognizant's Class A common stock. Under the terms of the ASR agreements, approximately 21.5 million of the shares to be repurchased will be received by Cognizant on March 14, 2017. "We are pleased to initiate this accelerated share repurchase program as we begin to execute on our enhanced capital return program," said Francisco D'Souza, Chief Executive Officer. "These repurchases demonstrate the commitment of the Board and management to deliver on our previously announced comprehensive plan to enhance shareholder return." 

AbbVie-ABBV announced that priority review has been granted by the Japanese Ministry of Health, Labour and Welfare (MHLW) for its treatment of all major genotypes of the chronic hepatitis C virus (HCV). This priority review follows European Medicines Agency (EMA) accelerated assessment and U.S. Food and Drug Administration (FDA) priority review designations in December 2016 and January 2017 respectively. "We will work closely with the Japanese Pharmaceuticals and Medical Devices Agency (PMDA) as part of our commitment to provide a potential cure for as many people living with HCV as possible," said Michael Severino, M.D., executive vice president, research and development and chief scientific officer, AbbVie. "We are pleased that G/P has now been recognized as a potential important therapy for people living with HCV through the receipt of priority review designations by regulatory authorities in Japan, the EU and the U.S."

Stryker-SYK announced the commercial launch of the highly anticipated robotic-arm assisted total knee arthroplasty application for use with its Mako System. This latest advancement distinguishes the Mako System as the first and only robotic technology that can be used across the joint replacement service line to perform total knee, total hip and partial knee replacements. Total knee replacements in the United States are expected to increase 673 percent by 2030, yet studies have shown that approximately 30 percent of patients are dissatisfied after conventional surgery. As this procedural growth materializes, surgeons will continue to seek clinical solutions that leverage technological advancements to improve their patient`s satisfaction. More than 83,000 Mako robotic-arm assisted procedures, including total knee, partial knee and total hip replacements, have been performed through 2016.  More than 350 Mako Systems have been placed in the United States with over 1,400 Mako Total Knee replacements performed to date.

Wabtec-WAB has acquired Aero Transportation Products (ATP), a manufacturer of engineered freight car components.  The company has annual sales of about $40 million.  Terms of the deal were not disclosed. ATP manufactures hatch covers and outlet gates for freight cars, which adds to Wabtec’s portfolio of engineered products.  ATP’s sales are mainly in the U.S., so it expects to benefit from Wabtec’s worldwide presence in key freight markets such as Australia and South America.

Johnson & Johnson-JNJ announced that final Phase 1 clinical trial show that business-unit Janssen Pharmaceutical Companies' investigational "prime-boost" Ebola vaccine regimen induced a durable immune response in 100 percent of healthy volunteers one year following vaccination. Janssen in partnership with Bavarian Nordic  rapidly scaled up production of the vaccine regimen and now has approximately 1,800,000 regimens available, with the capacity to produce several million regimens if needed.

Monday, March 13, 2017 Fluor-FLR announced  that its global alliance framework agreement with Yara Belgium SA, Europe’s largest producer of ammonia and nitrate fertilizer, has been extended by three years and expanded to provide engineering, procurement and construction management services to support Yara’s global operations.

Friday, March 10, 2017 United Technologies-UTX reaffirmed its guidance for fiscal 2017 and sees EPS of $6.30 to $6.60 with revenues in the range of $57.5 billion to $59 billion.

Wednesday, March 8, 2017 Qualcomm-QCOM announced a collaboration with Microsoft-MSFT to accelerate next generation cloud services on its 10 nanometer Qualcomm Centriq™ 2400 platform. This collaboration will span multiple future generations of hardware, software and systems.

Private sector employment increased by 298,000 jobs from January to February according to the February ADP National Employment Report®. "February proved to be an incredibly strong month for employment with increases we have not seen in years," said Ahu Yildirmaz, vice president and co-head of the ADP-ADP Research Institute. "Gains were driven by a surge in the goods sector, while we also saw the information industry experience a notable increase." Mark Zandi, chief economist of Moody's Analytics said, "February was a very good month for workers. Powering job growth were the construction, mining and manufacturing industries. Unseasonably mild winter weather undoubtedly played a role. But near record high job openings and record low layoffs underpin the entire job market."

Tuesday, March 7, 2017 Qualcomm-QCOM announced that its Board of Directors has approved a 7.5 percent increase in the Company's quarterly cash dividend to an annualized rate of $2.28 per share.  Steve Mollenkopf, CEO of Qualcomm Incorporated, said, "We are pleased to announce an increase in our quarterly dividend, a reflection of our commitment to returning capital to stockholders as we continue targeted investments in our technology roadmap. We look forward to closing the pending acquisition of NXP later this calendar year and expect the strong combined cash profile of Qualcomm and NXP to further strengthen our foundation for future capital returns for our stockholders."

Brown-Forman-BFB reported third quarter revenues were essentially flat at $808 million with net income down 4% to $182 million and EPS up 1% to $.47 on lower shares outstanding. Excluding acquisition/divestiture activity and adverse foreign exchange, underlying sales rose 4% with operating income up 3% during the quarter. Sales growth was driven by the continued gains for the Jack Daniel’s family of brands, including Tennessee Whiskey, Tennessee Honey and Gentleman Jack. The company’s bourbon brands delivered continued growth, including double-digit underlying net sales growth from Woodford Reserve and Old Forrester. Herradura and el Jimador tequila grew underlying net sales double digits in the U.S. Sonoma-Cutre grew underlying net sales high single-digits and Korbel was up low single-digits. The company’s developed markets outside of the U.S. grew year-to-date underlying sales by 3% while emerging markets sales continued to improve in the third quarter with 5% growth. Global Travel Retail results enjoyed a solid rebound from last year’s depressed levels with net sales up 7% on an underlying basis. For the first nine months of fiscal 2017, free cash flow increased 4% to $374 million with the company paying $203 million in dividends during the period and repurchasing 11.8 million shares for $561 million at an average price of $47 per share. Total debt increased to $2.2 billion as of 1/31/17 related to the issuance of two Eurobonds at favorable interest rates. The company has $330 million remaining authorized for future share repurchases. Management believes fiscal 2017 is on track to be another year of continued growth in underlying net sales and operating income despite the significant uncertainty that currently exists around the global economic and geopolitical environment, not to mention foreign exchange volatility. The company anticipates for the full fiscal 2017 year underlying net sales growth of 3% to 4% with underlying operating income growth of 5% to 7%, resulting in EPS of $1.71 to $1.76, including foreign exchange headwinds of approximately $.06 per share.

Monday, Mar. 6, 2017 Fastenal-FAST reported net sales increased 1.1% in February to $324.8 million with average daily sales up 6.1% to $16.2 million. Daily sales growth by end market was up 6.3% for manufacturing customers and 6.2% for non-residential construction customers. Sales by product line were up 1.5% for fasteners and 9.1% for other items. Year-to-date, Fastenal has opened four new stores, ending the month with 2,507 store locations. Employee headcount was down 4.4% at the end of the month to 19,872.

Friday, Mar. 3, 2017 Fastenal-FAST announced it has signed an agreement to acquire certain assets of industrial and fastener supply distributor Manufacturer's Supply Company (Mansco) with the deal expected to close by the end of March. The company focuses on fastener products, with a particularly strong market position with commercial furniture OEMs.  As such, this acquisition gives Fastenal a presence in a market where it has not meaningfully contributed in the past, while providing Mansco with additional tools with which to service its customer base. Mansco generated approximately $50 million of revenue in 2016, largely from its flagship Michigan location.  The company is profitable and the transaction should be accretive in the first twelve months, though it should not be material to earnings per share.

Thursday, Mar. 2, 2017 Cognizant Technology Solutions-CTSH announced the acquisition of Brilliant Service Co. Ltd., an intelligent products and solutions company headquartered in Osaka, Japan, specializing in digital strategy, product design and engineering, the Internet of Things (IoT), and enterprise mobility. As part of the acquisition, a team of 70 professionals with extensive digital solutions experience and insights in the Japanese market will join Cognizant. The terms of the transaction were not disclosed.

Tuesday, Feb. 28, 2017 Last year, YouTube, a unit of Alphabet-GOOGL, hit a big milestone with people around the world now watching a billion hours of YouTube’s content every single day, rewarding their curiosity, discovering great music, keeping up with the news, connecting with their favorite personalities or catching up with the latest trend. YouTube’s aggressive use of artificial intelligence to recommend videos has led to this 10-fold increase in viewership since 2012, which is set to outpace U.S. television viewership.

Baxter International-BAX and ScinoPharm Taiwan, Ltd. announced a strategic partnership to develop, manufacture and commercialize five injectable drugs used in a range of cancer treatments, including lung cancer, multiple myeloma and breast cancer, as well as medication to treat nausea and vomiting, common side effects of chemotherapy. The arrangement also provides Baxter the option to partner with ScinoPharm—one of the world’s leading active pharmaceutical ingredient (API) manufacturers—on as many as 15 additional injectable molecules. Current branded sales of the initial five products included in this partnership total more than $4 billion annually. These products will join Baxter’s existing portfolio of generic injectable medications, which includes difficult-to-manufacture oncology drugs and a broad portfolio of standard-dose, ready-to-use premixed injectable products such as anti-infectives, analgesics and critical care medicines.

Monday, Feb. 27, 2017 The Priceline Group-PCLN reported fourth quarter revenues rose 17% to $2.3 billion with net income booking a strong 34% gain to $674 million and EPS traveling 35% higher to $13.47 thanks to expanding margins. During the fourth quarter, room nights booked accelerated to 31% growth while rental car days motored 14% higher.  For the full year, revenues rose 17% to $10.7 billion with net income down 16% to $2.1 billion and EPS off 14% to $42.65, impacted by a $941 million non-cash goodwill impairment charge related to OpenTable. Return on equity for the year was a celebratory 21.7%. Free cash flow increased 27% during the year to $3.7 billion with cash and investments at the end of the year growing to $13.9 billion with long-term debt holding steady at about $6.2 billion. During the year, the company repurchased $1 billion of its own shares. Priceline expanded its share repurchase authorization by $2 billion with $4 billion now remaining available for future share repurchases. Potential tax reform will enable the company to access its cash, as the majority of it resides outside the U.S. Management’s outlook for the first quarter is for room nights booked to increase between 20% to 25%. Total gross travel bookings are expected to grow 17% to 22%, or 19% to 24% on a constant currency basis. Gross profit is expected to increase 9.5% to 14.5%, or 11% to 16% on a constant currency basis, with operating margins declining due to Easter seasonal timing differences. Priceline’s EPS should range between $7.50 to $7.90 during the fiscal first quarter.

Saturday, Feb. 25, 2017 Berkshire Hathaway-BRKB reported the company’s net worth during 2016 increased by 10.7% with book value equal to $172,108 per Class A share as of 12/31/16. Over the last 52 years, book value has compounded at a 19% annual rate from $19 to $172,108.  Berkshire’s stock price jumped 23.4% last year. Over the last 52 years, Berkshire’s stock price has compounded at a 20.8% annual return compared to the 9.7% annual return of the S&P 500 index (with dividends included).

The $27.5 billion increase in shareholders’ equity in 2016 was due to the company’s $24.1 billion in net earnings and $3.3 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation, partially offset by the impact of foreign currency. Approximately 56% of Berkshire’s $122 billion equity portfolio as of 12-31-16 is concentrated in four securities.  During 2016, IBM’s fair market value tabulated a $2.3 billion increase in market value, or a 21% gain, while American Express’ stock price charged up a 7% gain with a $700 million increase in market value during the year.  Despite negative publicity, Wells Fargo gained 1% for the year with a $400 million increase in market value while Coca-Cola fizzled 3% lower with a $600 million decline in market value. 

Berkshire’s operating revenues rose 7.5% to $215.8 billion in 2016.  Net income was relatively unchanged at $24.1 billion, which included $6.5 billion in investment and derivative gains, including after-tax gains of $2.7 billion from the disposition of preferred stock in Wrigley and Kraft Heinz and conversion of preferred stock of Dow Chemical and $1.9 billion in after-tax gains from the exchange of Procter & Gamble stock for Duracell.  Operating earnings (excluding investment and derivative gains/losses) increased 1.3% during the year to $17.6 billion. 

Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2016, marking 14 consecutive years of underwriting pre-tax profits which totaled $28 billion, including $1.4 billion in 2016 due in part to increased earnings from Berkshire Hathaway Reinsurance Group and General Re. Thanks to  low costs, GEICO’s gecko “gobbles up market share year after year,” ending 2016 with about 12% of industry volume compared to 2.5% in 1995, the year Berkshire acquired control of the company. GEICO’s growth accelerated dramatically during the second half of 2016 as the company increased its new business efforts. Berkshire Hathaway Specialty Insurance, formed less than three years ago, increased volume 40% in 2016, reaching $1.3 billion with the company poised to become one of the world’s leading P/C insurers. Berkshire’s insurance float, the money that doesn’t belong to Berkshire but which the company can invest for Berkshire’s business, also increased to a record $92 billion as of 12-31-16. Subsequent to year end, Berkshire wrote a huge policy with AIG that increased float to more than $100 billion. During the past 16 years, float has grown from $28 billion to $100 billion which has generated significant investment income for the company. Total insurance investment income approximated $3.6 billion in 2016, representing more than 20% of total operating earnings. 

Burlington Northern Santa Fe (BNSF), the company’s railroad, reported a 10% decline in revenues during 2016 to $19.8 billion with net income rolling 16% lower to $3.6 billion due to a 5% decline in unit volume and a 5.2% decline in average revenue per car/unit. BNSF experienced declining demand during the year especially in their coal and crude oil categories. Coal had the largest decline, driven by structural changes in that business as well as competition from low natural gas prices. Berkshire expects the long-term demand outlook for U.S. and global coal consumption to be lower. In addition, Berkshire expects low oil production and pipeline displacement will continue to negatively impact the demand for crude oil shipments in 2017. Despite the weak 2016 financial results, Warren Buffett and Charlie Munger “love our railroad, which was one of our better purchases.”

Berkshire Hathaway Energy (BHE) reported a sales decline of 2% during 2016 to $17.9 billion with net income up 7% to $2.3 billion. All of Berkshire’s energy units, with the exception of MidAmerican, posted revenue declines during the year. BHE earnings improved reflecting in part lower fuel prices and changes in fuel mix. The company’s real estate brokerage operation is also included in this group with revenue up 11% to $2.8 billion during 2016 and operating earnings up 18% to $225 million. HomeServices owns 38 realty company with more than 29,000 agents in 28 states and participated in $86 billion in volume last year. Berkshire expects to acquire many more realtors and franchisees in this business during the next decade.

Berkshire’s many dozens of smaller non-insurance companies increased revenues 11% to $120 billion with earnings up 20% to $5.6 billion. The growth is due primarily to the inclusion of Precision Castparts and Duracell which were acquired during the year.  Excluding Precision Castparts and Duracell, manufacturing revenues were flat and pre-tax earnings declined reflecting sluggish demand for many product categories. This collection of 44 businesses selling everything from lollipops to jet airplanes is expected to expand both in numbers and earnings as the years go by. Viewed as a single entity, the companies in this group earned 24% on net tangible assets of $24 billion in 2016 despite holding large quantities of excess cash and using only token amounts of leverage.

Berkshire’s Finance and Financial Products sector generated $7.7 billion in revenues in 2016, a 10% increase over the prior year, with net income up 4% to $1.4 billion. This growth was led by Clayton Homes with an 18% increase in revenues to $4.2 billion. Last year, Clayton became America’s largest home builder, delivering 42,075 units that accounted for 5% of all new American homes. Marmon’s railcar business experienced a major slowdown in demand last year, which will cause earnings to decline in 2017. Fleet utilization dropped from 97% to 91%, with the drop particularly severe at the large fleet purchased from GE in 2015. Marmon’s crane and container rentals have weakened as well.

New additions to Berkshire’s Top 15 investments this year included Apple valued at $7.1 billion as of year end, Delta Airlines valued at $2.7 billion, Southwest Airlines valued at $2.2 billion and United Continental valued at $1.9 billion.  (Subsequent to year end, Warren Buffett revealed he significantly increased his stake in Apple with the value now closer to $17 billion.) Berkshire has the option to buy 700 million shares of Bank of America at any time prior to Sept. 2021 for $5 billion. At year end, these shares were worth $15.5 billion, so Bank of America is in effect Berkshire’s third largest equity investment after Wells Fargo valued at $27.6 billion and Coca-Cola  valued at $16.6 billion as of year end.

Kraft Heinz is excluded from the Top 15 common stock investments as it is part of a control group, since Berkshire owns 27% of the company. Under equity accounting, Kraft Heinz is carried on Berkshire’s balance sheet at $15.3 billion but has a year end market value of $28.4 billion.

Some of the stocks in the Top 15 are the responsibility of either Todd Combs or Ted Weschler, who each independently manages more than $10 billion for Berkshire. While Buffett has often said his ideal holding period for controlled businesses is “forever,” he pointed out in this year’s letter that they have made no commitment to hold any of the marketable securities forever. (This may be a hint that one or more of the “Inevitables” such as Coca-Cola or American Express may be sold in the future.)

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $283 billion as of 12/31/16. Excluding utility and finance investments, Berkshire ended the year with $244.5 billion in investments allocated approximately 49.2% to equities ($120.5 billion), 9.6% to fixed-income investments ($23.4 billion), 5.9% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($14.4 billion), 6.3% to Kraft Heinz ($15.3 billion), and 29% in cash ($70.9 billion). 

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. During 2016, Berkshire acquired Precision Castparts for $32.7 billion and Duracell in exchange for Procter & Gamble shares, which had a fair value of $4.2 billion. Berkshire’s many subsidiaries also continue to regularly make bolt-on acquisitions, which totaled $1.4 billion in 2016. Many more bolt-on deals are expected in future years. Free cash flow jumped 27% during 2016 to $19.6 billion, primarily due to a 19% decline in capital expenditures to $13 billion.  During 2016, capital expenditures included $5.1 billion by Berkshire Hathaway Energy and $3.8 billion by BNSF. BNSF and Berkshire Hathaway Energy forecast aggregate capital expenditures to be about $8.6 billion in 2017. During 2016, Berkshire sold or redeemed a net $12 billion in equities, including Procter & Gamble and Wal-Mart. There were no share repurchases of Berkshire Hathaway stock during 2016, with Berkshire authorized to repurchase large amounts of Berkshire stock at 1.2 times or less of book value as that level represents a significant discount to Berkshire’s intrinsic value.

Berkshire’s intrinsic value far exceeds its book value. Berkshire’s per-share intrinsic value is expected to continue to build in the future by following the company’s simple blueprint: (1) constantly improving the basic earnings power of the many subsidiaries, (2) further increasing their earnings through bolt-on acquisitions, (3) benefiting from the growth of investments, (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value and (5) making an occasional large acquisition. (Kraft Heinz’s recent rebuffed offer for Unilever is an example of the type of elephant Buffett would like to “shoot.”)

Berkshire Hathaway’s stock appears fully valued, currently trading at $255,040 per A share and $170 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $197,000-$255,000 per share and the B shares to trade between $131-$170 per share.  Hold. 

Friday, Mar. 3, 2017 Fastenal-FAST announced it has signed an agreement to acquire certain assets of industrial and fastener supply distributor Manufacturer's Supply Company (Mansco) with the deal expected to close by the end of March. The company focuses on fastener products, with a particularly strong market position with commercial furniture OEMs.  As such, this acquisition gives Fastenal a presence in a market where it has not meaningfully contributed in the past, while providing Mansco with additional tools with which to service its customer base. Mansco generated approximately $50 million of revenue in 2016, largely from its flagship Michigan location.  The company is profitable and the transaction should be accretive in the first twelve months, though it should not be material to earnings per share.

Thursday, Mar. 2, 2017 Cognizant Technology Solutions-CTSH announced the acquisition of Brilliant Service Co. Ltd., an intelligent products and solutions company headquartered in Osaka, Japan, specializing in digital strategy, product design and engineering, the Internet of Things (IoT), and enterprise mobility. As part of the acquisition, a team of 70 professionals with extensive digital solutions experience and insights in the Japanese market will join Cognizant. The terms of the transaction were not disclosed.

Tuesday, Feb. 28, 2017 Last year, YouTube, a unit of Alphabet-GOOGL, hit a big milestone with people around the world now watching a billion hours of YouTube’s content every single day, rewarding their curiosity, discovering great music, keeping up with the news, connecting with their favorite personalities or catching up with the latest trend. YouTube’s aggressive use of artificial intelligence to recommend videos has led to this 10-fold increase in viewership since 2012, which is set to outpace U.S. television viewership.

Baxter International-BAX and ScinoPharm Taiwan, Ltd. announced a strategic partnership to develop, manufacture and commercialize five injectable drugs used in a range of cancer treatments, including lung cancer, multiple myeloma and breast cancer, as well as medication to treat nausea and vomiting, common side effects of chemotherapy. The arrangement also provides Baxter the option to partner with ScinoPharm—one of the world’s leading active pharmaceutical ingredient (API) manufacturers—on as many as 15 additional injectable molecules. Current branded sales of the initial five products included in this partnership total more than $4 billion annually. These products will join Baxter’s existing portfolio of generic injectable medications, which includes difficult-to-manufacture oncology drugs and a broad portfolio of standard-dose, ready-to-use premixed injectable products such as anti-infectives, analgesics and critical care medicines.

Monday, Feb. 27, 2017 The Priceline Group-PCLN reported fourth quarter revenues rose 17% to $2.3 billion with net income booking a strong 34% gain to $674 million and EPS traveling 35% higher to $13.47 thanks to expanding margins. During the fourth quarter, room nights booked accelerated to 31% growth while rental car days motored 14% higher.  For the full year, revenues rose 17% to $10.7 billion with net income down 16% to $2.1 billion and EPS off 14% to $42.65, impacted by a $941 million non-cash goodwill impairment charge related to OpenTable. Return on equity for the year was a celebratory 21.7%. Free cash flow increased 27% during the year to $3.7 billion with cash and investments at the end of the year growing to $13.9 billion with long-term debt holding steady at about $6.2 billion. During the year, the company repurchased $1 billion of its own shares. Priceline expanded its share repurchase authorization by $2 billion with $4 billion now remaining available for future share repurchases. Potential tax reform will enable the company to access its cash, as the majority of it resides outside the U.S. Management’s outlook for the first quarter is for room nights booked to increase between 20% to 25%. Total gross travel bookings are expected to grow 17% to 22%, or 19% to 24% on a constant currency basis. Gross profit is expected to increase 9.5% to 14.5%, or 11% to 16% on a constant currency basis, with operating margins declining due to Easter seasonal timing differences. Priceline’s EPS should range between $7.50 to $7.90 during the fiscal first quarter.

Saturday, Feb. 25, 2017 Berkshire Hathaway-BRKB reported the company’s net worth during 2016 increased by 10.7% with book value equal to $172,108 per Class A share as of 12/31/16. Over the last 52 years, book value has compounded at a 19% annual rate from $19 to $172,108.  Berkshire’s stock price jumped 23.4% last year. Over the last 52 years, Berkshire’s stock price has compounded at a 20.8% annual return compared to the 9.7% annual return of the S&P 500 index (with dividends included).

The $27.5 billion increase in shareholders’ equity in 2016 was due to the company’s $24.1 billion in net earnings and $3.3 billion of gains in other comprehensive income primarily related to changes in unrealized investment appreciation, partially offset by the impact of foreign currency. Approximately 56% of Berkshire’s $122 billion equity portfolio as of 12-31-16 is concentrated in four securities.  During 2016, IBM’s fair market value tabulated a $2.3 billion increase in market value, or a 21% gain, while American Express’ stock price charged up a 7% gain with a $700 million increase in market value during the year.  Despite negative publicity, Wells Fargo gained 1% for the year with a $400 million increase in market value while Coca-Cola fizzled 3% lower with a $600 million decline in market value. 

Berkshire’s operating revenues rose 7.5% to $215.8 billion in 2016.  Net income was relatively unchanged at $24.1 billion, which included $6.5 billion in investment and derivative gains, including after-tax gains of $2.7 billion from the disposition of preferred stock in Wrigley and Kraft Heinz and conversion of preferred stock of Dow Chemical and $1.9 billion in after-tax gains from the exchange of Procter & Gamble stock for Duracell.  Operating earnings (excluding investment and derivative gains/losses) increased 1.3% during the year to $17.6 billion. 

Berkshire’s huge and growing insurance operation again operated at an underwriting profit in 2016, marking 14 consecutive years of underwriting pre-tax profits which totaled $28 billion, including $1.4 billion in 2016 due in part to increased earnings from Berkshire Hathaway Reinsurance Group and General Re. Thanks to  low costs, GEICO’s gecko “gobbles up market share year after year,” ending 2016 with about 12% of industry volume compared to 2.5% in 1995, the year Berkshire acquired control of the company. GEICO’s growth accelerated dramatically during the second half of 2016 as the company increased its new business efforts. Berkshire Hathaway Specialty Insurance, formed less than three years ago, increased volume 40% in 2016, reaching $1.3 billion with the company poised to become one of the world’s leading P/C insurers. Berkshire’s insurance float, the money that doesn’t belong to Berkshire but which the company can invest for Berkshire’s business, also increased to a record $92 billion as of 12-31-16. Subsequent to year end, Berkshire wrote a huge policy with AIG that increased float to more than $100 billion. During the past 16 years, float has grown from $28 billion to $100 billion which has generated significant investment income for the company. Total insurance investment income approximated $3.6 billion in 2016, representing more than 20% of total operating earnings. 

Burlington Northern Santa Fe (BNSF), the company’s railroad, reported a 10% decline in revenues during 2016 to $19.8 billion with net income rolling 16% lower to $3.6 billion due to a 5% decline in unit volume and a 5.2% decline in average revenue per car/unit. BNSF experienced declining demand during the year especially in their coal and crude oil categories. Coal had the largest decline, driven by structural changes in that business as well as competition from low natural gas prices. Berkshire expects the long-term demand outlook for U.S. and global coal consumption to be lower. In addition, Berkshire expects low oil production and pipeline displacement will continue to negatively impact the demand for crude oil shipments in 2017. Despite the weak 2016 financial results, Warren Buffett and Charlie Munger “love our railroad, which was one of our better purchases.”

Berkshire Hathaway Energy (BHE) reported a sales decline of 2% during 2016 to $17.9 billion with net income up 7% to $2.3 billion. All of Berkshire’s energy units, with the exception of MidAmerican, posted revenue declines during the year. BHE earnings improved reflecting in part lower fuel prices and changes in fuel mix. The company’s real estate brokerage operation is also included in this group with revenue up 11% to $2.8 billion during 2016 and operating earnings up 18% to $225 million. HomeServices owns 38 realty company with more than 29,000 agents in 28 states and participated in $86 billion in volume last year. Berkshire expects to acquire many more realtors and franchisees in this business during the next decade.

Berkshire’s many dozens of smaller non-insurance companies increased revenues 11% to $120 billion with earnings up 20% to $5.6 billion. The growth is due primarily to the inclusion of Precision Castparts and Duracell which were acquired during the year.  Excluding Precision Castparts and Duracell, manufacturing revenues were flat and pre-tax earnings declined reflecting sluggish demand for many product categories. This collection of 44 businesses selling everything from lollipops to jet airplanes is expected to expand both in numbers and earnings as the years go by. Viewed as a single entity, the companies in this group earned 24% on net tangible assets of $24 billion in 2016 despite holding large quantities of excess cash and using only token amounts of leverage.

Berkshire’s Finance and Financial Products sector generated $7.7 billion in revenues in 2016, a 10% increase over the prior year, with net income up 4% to $1.4 billion. This growth was led by Clayton Homes with an 18% increase in revenues to $4.2 billion. Last year, Clayton became America’s largest home builder, delivering 42,075 units that accounted for 5% of all new American homes. Marmon’s railcar business experienced a major slowdown in demand last year, which will cause earnings to decline in 2017. Fleet utilization dropped from 97% to 91%, with the drop particularly severe at the large fleet purchased from GE in 2015. Marmon’s crane and container rentals have weakened as well.

New additions to Berkshire’s Top 15 investments this year included Apple valued at $7.1 billion as of year end, Delta Airlines valued at $2.7 billion, Southwest Airlines valued at $2.2 billion and United Continental valued at $1.9 billion.  (Subsequent to year end, Warren Buffett revealed he significantly increased his stake in Apple with the value now closer to $17 billion.) Berkshire has the option to buy 700 million shares of Bank of America at any time prior to Sept. 2021 for $5 billion. At year end, these shares were worth $15.5 billion, so Bank of America is in effect Berkshire’s third largest equity investment after Wells Fargo valued at $27.6 billion and Coca-Cola  valued at $16.6 billion as of year end.

Kraft Heinz is excluded from the Top 15 common stock investments as it is part of a control group, since Berkshire owns 27% of the company. Under equity accounting, Kraft Heinz is carried on Berkshire’s balance sheet at $15.3 billion but has a year end market value of $28.4 billion.

Some of the stocks in the Top 15 are the responsibility of either Todd Combs or Ted Weschler, who each independently manages more than $10 billion for Berkshire. While Buffett has often said his ideal holding period for controlled businesses is “forever,” he pointed out in this year’s letter that they have made no commitment to hold any of the marketable securities forever. (This may be a hint that one or more of the “Inevitables” such as Coca-Cola or American Express may be sold in the future.)

Berkshire’s balance sheet continues to reflect significant liquidity and a strong capital base of $283 billion as of 12/31/16. Excluding utility and finance investments, Berkshire ended the year with $244.5 billion in investments allocated approximately 49.2% to equities ($120.5 billion), 9.6% to fixed-income investments ($23.4 billion), 5.9% to other investments, including preferred stocks in Bank of America and Restaurant Brands International ($14.4 billion), 6.3% to Kraft Heinz ($15.3 billion), and 29% in cash ($70.9 billion). 

Berkshire’s financial strength allows Buffett to make significant investments and acquisitions. During 2016, Berkshire acquired Precision Castparts for $32.7 billion and Duracell in exchange for Procter & Gamble shares, which had a fair value of $4.2 billion. Berkshire’s many subsidiaries also continue to regularly make bolt-on acquisitions, which totaled $1.4 billion in 2016. Many more bolt-on deals are expected in future years. Free cash flow jumped 27% during 2016 to $19.6 billion, primarily due to a 19% decline in capital expenditures to $13 billion.  During 2016, capital expenditures included $5.1 billion by Berkshire Hathaway Energy and $3.8 billion by BNSF. BNSF and Berkshire Hathaway Energy forecast aggregate capital expenditures to be about $8.6 billion in 2017. During 2016, Berkshire sold or redeemed a net $12 billion in equities, including Procter & Gamble and Wal-Mart. There were no share repurchases of Berkshire Hathaway stock during 2016, with Berkshire authorized to repurchase large amounts of Berkshire stock at 1.2 times or less of book value as that level represents a significant discount to Berkshire’s intrinsic value.

Berkshire’s intrinsic value far exceeds its book value. Berkshire’s per-share intrinsic value is expected to continue to build in the future by following the company’s simple blueprint: (1) constantly improving the basic earnings power of the many subsidiaries, (2) further increasing their earnings through bolt-on acquisitions, (3) benefiting from the growth of investments, (4) repurchasing Berkshire shares when they are available at a meaningful discount from intrinsic value and (5) making an occasional large acquisition. (Kraft Heinz’s recent rebuffed offer for Unilever is an example of the type of elephant Buffett would like to “shoot.”)

Berkshire Hathaway’s stock appears fully valued, currently trading at $255,040 per A share and $170 per B share. Based on current business fundamentals, we expect Berkshire’s A shares to trade between $197,000-$255,000 per share and the B shares to trade between $131-$170 per share.  Hold. 

Friday, Feb. 24, 2017 Hormel Foods-HRL reported first fiscal quarter sales dipped 1% to $2.3 billion with net earnings of $235 million and EPS of $.44, up slightly from last year.  By segment, Refrigerated Foods sales of $1.1 billion declined 3% year-over-year, primarily due to the exclusion of the Farmer John business which was divested in January 2017. HORMEL®pepperoni,  HORMEL® BACON 1TM fully cooked bacon, HORMEL GATHERINGS® party trays and HORMEL® NATURAL CHOICE® meats had excellent sales growth. Jennie-O-Turkey Store sales increased 13% to $421 million on a 22% increase in volume with segment profit falling 25% as turkey breast prices plummeted 60% year-over-year to a seven year low.  While management had anticipated a drop in turkey prices as industry-wide production ramped up in the aftermath of the 2015 bird-flu outbreak, the erosion of market conditions was deeper and faster than expected. Pricing pressure from competing proteins and increased expenditures on biosecurity to protect the flocks from future flu outbreaks also gobbled up Jennie-O segment profits. On the conference call, management assured investors that Hormel has been through similar market cycles in 2003 and 2008-09, and, in each case, Hormel emerged stronger.  Grocery Products sales increased 7% to $418 million thanks, in part, to the acquisition of JUSTIN’S® specialty nut butters, which is expected to generate sales of $100 million for the full year.  Strong sales of WHOLLY GUACAMOLE® dips, SKIPPY® peanut butter products and HERDEZ® salsa also contributed to the year-over-year sales increase. Hormel generated $144 million in free cash flow during the quarter, down 42% from last year, clipped by working capital demands. During the quarter, Hormel returned $107 million to shareholders through $77 million in dividends and $31 million in share repurchases at $35.63 per average share.  Twelve million shares remain under Hormel’s current repurchase program, and the company expects to repurchase shares during 2917 to offset dilution from stock-based compensation. In February, Hormel paid its 354th consecutive quarterly dividend at the annual rate of $0.68. Given the challenges at Jennie-O Turkey Store, Hormel lowered its fiscal 2017 year guidance by 3 cents to $1.65 to $1.71 per share.

Wednesday, Feb. 22, 2017 The Cheesecake Factory-CAKE reported fourth quarter revenues increased a sweet 14.5% to $603 million with net income up 19% to $32 million and EPS up 22% to $0.66 on fewer shares outstanding. An extra week during the latest quarter contributed about $55 million to this quarter’s sales. Comparable restaurant sales increased 1.1% in the fourth quarter of fiscal 2016 as CAKE’s traffic patterns continued to outpace industry trends. Cheesecake Factory opened 5 new stores during the quarter, bringing the total number of restaurants to 194. Despite 5% wage inflation, operating margins increased by 40 basis points from last year’s fourth quarter thanks to benign commodity inflation, operating leverage from the increased sales and the extra week plus the timing of stock-based compensation expense. During the quarter, the company repurchased 500,000 shares for $27.5 million, or $55 per average share. For the full year, Cheesecake Factory reported revenues of $2.3 billion, up 8% year-over-year, with earnings of $139.5 million, up 20%, and EPS of $2.83, up 23%. Seven new stores were opened during 2016. The company generated a tasty 23.1% return on shareholders’ equity during 2016 and $145 million in free cash flow. During 2016, the company repurchased a total of 2.9 million shares for $146.5 million, or $50.52 per average share. Looking ahead to 2017, first quarter comp store sales are expected to be flat to up 1%, hurt by the timing of Easter and spring break. First quarter sales are projected to be $565 million at the midpoint of the expected range, up about 2% from the first quarter of 2016. EPS are expected in the $0.71 to $0.74 range, up 4% to 9% from last year. Management expects to open up to 8 new stores during 2017, with openings weighted toward the back half of the year. Comp store sales are expected in up 1% to 2% and adjusted EPS are expected in the $2.95 to $3.07 range, up 4% to 8% from 2016.  The company expects to return its 2017 free cash flow to shareholders in the form of dividends and share buybacks. 

The TJX Companies-TJX celebrated its 40-year anniversary with a long track record of consistent profit growth and sales topping $33 billion for the year as comparable store sales increased in every major division. Comparable store sales have increased each year for 21 consecutive years with same store sales up each year over the last four decades with the exception of one year, a truly remarkable retail accomplishment.  TJX reported fourth quarter revenues rose 6% to $9.5 billion, driven by 3% comparable store sales growth, with net income up 2% to $678 million and EPS up 4% to $1.03. For the full year, revenues rose 7% to $33.2 billion, thanks to strong 5% comparable store sales growth, with net income up 1% to $2.3 billion and EPS up 4% to $3.46. Return on shareholders’ equity was a highly fashionable and profitable 51%. These terrific results, in a challenging retail environment, reflect the company’s ability to grow its customer base around the world while gaining market share in each division. During the year, the company opened 198 new stores, increasing its square footage 4% and its store base 6% to 3,812 stores as of year end. TJX expects to surpass the 4,000 store milestone in fiscal 2018 as it accelerates new store openings.   Free cash flow increased 26% during the year to $2.6 billion with the company paying $651 million in dividends and repurchasing 22.3 million shares of its own stock for $1.7 billion at an average price of $76.23 per share.  As part of its disciplined capital allocation policy, TJX announced a 20% increase in its dividend for fiscal 2018, marking the 21st consecutive year of dividend increases. Over this time period, the dividend has grown at a 23% compound annual rate.  In addition, management plans to repurchase approximately $1.3 to $1.8 billion of its stock during fiscal 2018 and still end the fiscal year with $3.3 billion in cash and investments, reflecting the company’s strong cash flow generation and financial flexibility. Management’s outlook for fiscal 2018 is for total revenues to increase 6%-7% to $35.2 to $35.6 billion, with 1%-2% comparable store sales growth. The company expects EPS to be up 10%-12% in the range of $3.80-$3.89 in fiscal 2018, which includes an $.11 per share benefit from the 53rd week in fiscal 2018.

Tuesday, Feb. 21, 2017 Genuine Parts-GPC reported fourth quarter sales motored ahead 3% to $3.8 billion with net income and EPS stalling 5% to $153 million and $1.02, respectively. Operating margins compressed 80 basis points to 6.3%, flattened by increased IT spending to improve efficiency and higher insurance, legal, professional and acquisition related expenses. Focused on improving operating margins, management continues rationalization efforts to reduce costs and improve efficiencies across the business. Fourth quarter sales trends were the strongest of the year, driven by acquisitions.  By segment, Automotive Group sales increased 2% to $2 billion, including a 1% comparable sales increase.  Sales at GPC’s Industrial Group moved ahead 4% to $1.2 billion, powered by rebounding exports in the equipment and machinery sector plus an increase in the energy sector which improved from a double-digit decline in the third quarter to a double-digit increase in the fourth quarter on a jump in rig counts. The year-end pick up in the Industrial Production and PMI indices bodes well for 2017 Industrial Group sales growth. Fourth quarter Office Products Group sales were up 4% to $476 million, driven by a 12% contribution from acquisitions in the facilities, breakroom and safety supply category. Excluding acquisitions, comparable Office Product sales were down in the fourth quarter. For the full year, Genuine Parts sales increased slightly to $15.3 billion with net income declining 2% to $687 million and EPS dipping 1% to $4.59. During 2016, Genuine Parts delivered a solid 21.4% return on shareholders’ equity. Free cash flow was $785,435, an impressive 114% of 2016 net income. Free cash flow declined 25% from last year, squeezed by increases in accounts receivable thanks to strong December sales and a jump in inventory in the wake of acquisitions. During 2016, GPC acquired 19 companies for about $400 million with estimated annualized sales of $600 million. Reinvesting in the business, acquisitions, dividends and share repurchases remain GPC’s priorities for cash. To that end, during 2016, GPC returned $568 million to shareholders through share repurchases of $181 million and dividends of $387 million. Marking the 61st consecutive year of increased dividends, GPC’s board recently announced a 3% increase in the annual dividend to $2.70 per share, representing 57% of 2016 earnings. Looking ahead to 2017, management expects sales to increase 3% to 4% from 2016 with EPS in the $4.70 to $4.80 range, up 2% to 5% year-over-year.

UPS-UPS provided 2018 and 2019 long-term financial targets at its investor conference with revenue growth of 4% to 6% over the period and adjusted EPS up 5% to 10%. The company is planning $1 billion to $1.8 billion in annual share repurchases with capital investments expected to approximate 6%-7% of revenues annually. The company also announced plans to expand its U.S. delivery and pickup schedule to include six days for ground shipments. UPS will offer Saturday delivery options to the largest metropolitan areas and has started the rollout throughout the U.S.

Wabtec-WAB reported fourth quarter revenues declined 9% to $760 million with net income down 63% to $37.8 million and EPS down 60% to $.42. Higher sales in the Transit Group were more than offset by lower sales in the Freight Group during the quarter affected by lower revenues from train control-related equipment sales and lower industry deliveries of new freight cars and locomotives. Fourth quarter sales did not meet management’s expectations due in part to unfavorable product mix. Earnings in the quarter were adversely impacted by transaction, restructuring and higher interest expenses related to the Faiveley acquisition along with contract adjustments. For the full year, revenues declined 11% to $2.9 billion with net income down 24% to $305 million and EPS off 19% to $3.34 due to the significant headwinds in the freight and industrial markets. During the year, the company generated strong cash flows from operations of $449 million, exceeding net income by 45%. At year end, the company had cash of $398 million and debt of $1.9 billion. During 2016, Wabtec repurchased approximately 3 million shares of its common stock for about $212 million, or about $69.63 per share. The company has about $138 million remaining authorized for future share repurchases. Backlog increased 10% in the fourth quarter, with the company ending the year with $4 billion in backlog, including $1.9 billion from the Faiveley acquisition. Wabtec’s 2017 outlook is for revenues of about $4.1 billion with adjusted EPS expected in the range of $3.95-$4.15, representing 6%-7% growth at the midpoint over adjusted 2016 earnings. Wabtec estimates synergies from the Faiveley acquisition to be about $15 million to $20 million in 2017, with long-term synergies expected to exceed $50 million.

Monday, Feb. 20, 2017 Kraft Heinz dropped its $143 billion bid for Unilever PLC after 48 hours of making a bid to combine the two companies. Berkshire Hathaway-BRKB is Kraft Heinz's largest shareholder and would likely have played a significant role in the proposed merger.

Friday, Feb. 17, 2017 Fluor – FLR reported results for the fourth quarter and full year of 2016. Revenues for the quarter were $5 billion up 14% year over year.  Fourth quarter revenues in the Infrastructure and Industrials segment grew 107.8% and the Government segment increased 7.3% over the prior year.  The gains were partially offset by a decline in the Energy, Chemical and Mining segment.  Full year revenues were up 5.1% to $19 billion with only the Energy, Chemical and Mining segment not experiencing revenue growth for the year.  Fluor reported fourth quarter earnings of $70 million or $0.50 per share which included adverse fourth quarter tax effects of $45 million, or $0.32 per diluted share. Full year earnings for 2016 totaled $281.4 million or $2.00 per share, down 31.8% from the prior year. Return on equity dropped to 9.0% during 2016 due to the lower earnings.  Fluor ended the year with $2 billion in cash and $1.5 billion in long-term debt on their balance sheet. Free cash flow decreased 22% during 2016 to $470 million.  Fluor repurchased $10 million in shares during the year as part of its repurchase program and paid $118 million in dividends.  Management reaffirmed its earnings guidance for 2017 of $2.75 to $3.25 per share.  Consolidated backlog at year-end was $45 billion, compared with $44.7 billion a year ago, reflecting growth in the Government and Infrastructure and Industrials segments. While the growth is slow due to less than ideal market conditions, management is optimistic that 2018-2019 will see an end to delays in capital expenditures and major maintenance spending as customers react to stabilizing oil and commodity prices.  In addition, management expects the new administration’s infrastructure spending priorities, proposed tax policies and America first agenda to benefit the company by 2018.

The board of directors of AbbVie-ABBV authorized a $5 billion increase to AbbVie's existing stock repurchase program.

By the end of 2020, Accenture-ACN will open 10 new innovation hubs in key cities in the U.S. and expand its regional network of technology delivery centers. Additionally, Accenture will invest $1.4 billion in training to ensure its people have leading-edge capabilities to serve its clients, while creating 15,000 highly skilled new jobs in the U.S.

Thursday, Feb. 16, 2017 T. Rowe Price Group-TROW announced today that its Board of Directors has declared a quarterly dividend of $0.57 per share payable March 30, 2017 to stockholders of record as of the close of business on March 16, 2017. The quarterly dividend rate represents a 5.6% increase over the previous quarterly dividend rate of $0.54 per share. This will mark the 31st consecutive year since the firm's initial public offering that the company will have increased its regular annual dividend.

Wednesday, Feb. 15, 2017 Cisco Systems-CSCO reported fiscal second quarter revenues declined 3% to $11.6 billion with net income down 25% to $2.3 billion and EPS down 24% to $.47. Product revenue declined 4% during the quarter with service revenue up 5%. Product revenue performance was led by Security which increased 14%, as customers crave protection from cyberattacks. Collaboration and Wireless product revenue increased by 4% and 3%, respectively. NGN Routing, Switching and Data Center product revenue decreased by 10%, 5% and 4%, respectively. Service Provider Video product revenue decreased by 41% as this business was divested during the second quarter of fiscal 2016.  Revenue by geographic segment was: Americas down 3%, EMEA flat and APJC down 3%. Management believes customers in the U.S. are on solid footing with customers in Europe and Asia remaining cautious due to geopolitical concerns. Deferred revenue was up 13% to $17.1 billion during the quarter with deferred product revenue up 19% driven largely by subscription-based and software offerings, which grew 51%. Deferred service revenue was up 9%.  Earnings were impacted by lower product gross margin due to pricing and product mix and higher operating expenses, primarily due to the gain recorded in the second quarter of 2016 from the sale of the SP Video business. Free cash flow during the first half of the year declined 2% to $6 billion with the company repurchasing $2 billion of its stock, including 33 million shares in the second quarter for $1 billion at an average price of $30.33 per share. Cisco has $13.4 billion remaining authorized for future share repurchases. During the first half, Cisco paid $2.6 billion in dividends. The company announced a 12% increase in the quarterly dividend to $.29 per share, boosting its dividend yield to 3.5% based on the current stock price. Cisco ended the quarter with $30.5 billion in long-term debt and more than $71 billion in cash and investments on its balance sheet, including $9.6 billion held in the U.S. If Cisco is able to repatriate the billions of cash held outside of the U.S., the company will focus on using the cash for mergers and acquisitions (M&A) although it will not fundamentally change their M&A strategy. Cisco will also continue to return significant cash to shareholders through dividends and share repurchases. The company’s outlook for the fiscal third quarter is for revenues to be flat to down 2% with EPS expected in the range of $.44 to $.49.

Express Scripts-ESRX reported fourth quarter revenue declined 5% to $24.9 billion with net income up 85% to $1.4 billion and EPS more than doubling to $2.34. During the fourth quarter, Express Scripts received a net tax benefit of $511 million or $.81 per share related to the disposition of PolyMedica. Excluding specified items such as the tax benefit, adjusted net income and EPS increased 8% and 21%, respectively, during the fourth quarter. Adjusted claims during the quarter were down 6% to 354.9 million largely due to the roll-off of the Coventry business. Adjusted EBITDA was up 6% to $2.1 billion with adjusted EBITDA per adjusted claim up 14% to $5.79.  For the full year, revenues dipped 1% to $100.3 billion with net income up 37% to $3.4 billion and EPS up 51% to $5.39. Adjusted net income and EPS were up 5% and 16%, respectively, for the year. Adjusted claims of 1.4 billion were down 2% for the year, but excluding the impact of the Coventry roll-off, adjusted claims were up 3%. Adjusted EBITDA of $7.3 billion was up 3% year over year with adjusted EBITDA per adjusted claim up 6% to $5.16. Return on shareholders’ equity for the year was a healthy 21% with client retention a strong 98% during the year. Free cash flow increased 1% during the year to $4.6 billion with the company repurchasing a significant 74.4 million of its own shares during the year for $5.6 billion at an average price of approximately $74.89 per share. The company expanded its share repurchase program by an additional 65 million shares and plans to actively be repurchasing shares throughout 2017. Express Scripts reaffirmed its 2017 adjusted EPS guidance in the range of $6.82 to $7.02, which represents 8% growth at the midpoint. The company expects total adjusted claims in the range of 1,375 to 1,425 million with EBITDA expected in the range of $7.3 billion to $7.5 billion. Cash flow from operations is expected in the range of $4.7 billion to $5.2 billion in 2017. With potential healthcare reform, Express Scripts’ expertise will help clients navigate the changing regulations.

PepsiCo-PEP reported fourth quarter revenues increased 5% to $19.5 billion with net income falling 18% to $1.4 billion and EPS dropping 17% to $.97 per share, flattened by the impacts of pension-related settlements, a charge related to the redemption of $2.5 billion of 7.9% senior notes due in 2018, as well as the year-ago non-cash tax benefit associated with an IRS settlement. Excluding these items, core EPS was $1.20, up 13% year-over-year. For the full year, PepsiCo reported revenues of $62.8 billion, flat with last year, net income of $6.3 billion, up 16% from last year, and EPS of $4.36, up 19%. Organic revenue, which excludes the impact of foreign exchange, the Venezuela deconsolidation and the impact of a 53rd reporting week, grew 4% during 2016 and core EPS grew 6% to $4.85. During 2016, PepsiCo served up a 56.3% return on shareholders’ equity and a 15.2% return on invested capital. PepsiCo ended the year with $16 billion in cash, $30 billion in long-term debt and $11 billion in shareholders’ equity.  The company generated $7.4 billion in free cash flow during 2016, down 6% from last year, on higher capital expenditures. PepsiCo returned $7.2 billion to shareholders during 2016 through $3 billion in share repurchases and $4.2 billion in dividends. During the quarterly conference call, PepsiCo announced its 45th consecutive annual dividend increase, up 7% from 2016 to $3.22 per share, reflecting a 3% yield on the 2/14/2017 closing price. Looking ahead to 2017, PepsiCo expects organic revenue growth of at least 3% with a 3% foreign currency headwind and a 1% negative impact from the 53rd week comp. Core EPS are expected to increase 5% to $5.09. Management expects to generate $10 billion in operating cash flow during 2017 and $7 billion in free cash flow. PepisCo expects to return $6.5 billion to shareholders in 2017 through dividends of $4.5 billion and share repurchases of $2 billion. When asked how the Brexit and the U.S. election has impacted consumer behavior in the U.K and Mexico, Indra Nooyi, chairman and CEO, stated, “We are basic food and beverage. I don't believe political actions impact consumption of our products. And we're not seeing any deterioration in activity versus our products, and the market growth continues.”  Earlier in the call ,Mrs. Nooyi assured investors, “We are committed to continue to manage everything within our control in what we expect will be a volatile and uncertain macro environment in order to deliver attractive results in the short-term, as we continue to position the business for long-term success.”

During the past quarter, Berkshire Hathaway-BRKB nearly quadrupled its investment in Apple-AAPL to 57 million shares currently valued at approximately $7.7 billion, while also significantly adding to its investments in all major airline stocks.

Friday, Feb. 10. 2017 Fluor-FLR announced that it expects fourth quarter results, scheduled to be released on February 17, to include non-cash adverse tax effects of $45 million, or $0.32 per diluted share, as a result of the inability to deduct or otherwise benefit certain foreign losses. The primary reason for these adverse effects is new IRS regulations (under section 987 of the code) issued on December 7, 2016, which will limit the deductibility of foreign currency translation losses in certain foreign subsidiaries. These foreign subsidiaries are those which operate in a currency other than the U.S. dollar, for tax purposes are branches of United States entities and, accordingly, whose profits and losses are otherwise fully taxable in the United States. Also significantly contributing to the adverse tax effects are losses of other foreign subsidiaries for which tax benefit cannot be provided in the current period. These losses are primarily related to organizational realignment activities. Including the adverse tax effects, the Company expects to report fourth quarter net profit from continuing operations of $70 million, or $0.50 per fully diluted share. Excluding the adverse tax effects, the company expects to report a net profit from continuing operations of $115 million, or $0.82 per diluted share for the fourth quarter of 2016. The Company is maintaining its EPS guidance for 2017 at the previously announced range of $2.75 to $3.25 per diluted share.

The Walt Disney Company-DIS announced that it will acquire through one of its subsidiaries 90% of Kingdom Holding Company's ("Kingdom") shares in Euro Disney S.C.A. ("Euro Disney") at a price of €2.00 per share, increasing its interest in Euro Disney to 85.7%.  Disney also announced that this subsidiary intends to make a cash tender offer for all remaining outstanding shares of Euro Disney at a price of €2.00 per share, representing a 67% premium to the trading price at the close on February 9, 2017.  Moreover, Disney has informed Euro Disney that it is committed to support a recapitalization of up to €1.5 billion for the Euro Disney group of companies ("Group") to enable the Group to continue implementation of improvements to Disneyland® Paris, reduce debt and increase liquidity. As previously reported by Euro Disney, despite the recapitalization announced in 2014 that enabled the Group to make attraction and hotel improvements which have generated positive guest feedback and set the stage for the Resort's 25th Anniversary celebration this year, the Group's financial condition has been significantly and negatively impacted by the November 2015 events in Paris and the challenging business conditions that continued through 2016 in France and throughout Europe.  The comprehensive proposal announced by Disney affords maximum flexibility to shareholders, addresses the Group's financial needs and reflects its ongoing support for the long-term success of Disneyland® Paris.

Thursday, Feb. 9, 2017 Maximus-MMS reported first quarter revenue rose 9% to $607.6 million driven by 17% growth in the Health Services Segment to $340.7 million. On a constant currency basis, revenue would have increased 12% with organic revenue growth up 11% and acquired growth of 1%.  The company’s net income rose 75% during the quarter to $46.6 million with EPS up 78% to $.71. The earnings growth was driven by improved income contributions across all segments, most notably from the Health Services and U.S. Federal Services Segments. The prior-year period was tempered by programs in start up, as well as the timing of an $8.6 million delayed change order where the costs were recorded in the first quarter but the associated revenue and profit were recognized at the time of the contract execution in the second quarter of fiscal 2016. During the first quarter of fiscal 2017, Maximus generated strong cash flows from operations of $71.1 million and free cash flow of $63.4 million. During the quarter, the company paid $2.9 million in dividends and repurchased 559,000 shares of its own shares for $28.8 million at an average price of $51.68 per share with $109 million remaining authorized for future share repurchases. Year-to-date signed contract awards at 12/31/16 totaled $462.4 million. New contracts pending (awarded but unsigned) totaled $150.4 million. The sales pipeline at 12/31/16 was $4 billion, comprised of approximately $1.7 billion in proposals pending, $.2 billion in proposals in preparations and $2 billion in opportunities tracking. Maximus lowered its 2017 revenue guidance most notably as a result of a canceled contract due to insufficient volumes in the U.S. Federal Services Segment. Maximus now expects revenue to range between $2.425 billion and $2.475 billion compared to the prior range of $2.475 billion to $2.55 billion. The company continues to expect EPS in the range of $2.90 to $3.10 for fiscal 2017 with free cash flow in the range of $170 million to $220 million, representing 27% to 64% growth in free cash flow over last year.

Canadian National Railway-CNI announced its planned C$2.5 billion capital program in 2017 focused on hardening its core infrastructure. CN plans to invest approximately C$1.6 billion, consistent with last year's investment, on track infrastructure to maintain a safe and efficient network. The planned work includes the replacement of 2.2 million rail ties and installation of more than 600 miles of new rail, plus work on bridges, branch line upgrades and other general track maintenance. The company plans to invest approximately C$400 million in 2017 to advance the implementation of PTC, the safety technology mandated by the United States Congress, along parts of its U.S. network. CN will install the hardware on approximately 3,500 route-miles and plans to invest a total of US$1.2 billion on the entire project by 2020. Approximately C$500 million is expected to be spent on equipment, expansion projects and information technology initiatives to serve growing business, improve service for customers and advance safety. This includes planned growth investments to capitalize on Canadian west coast port expansions and key customer projects, and safety technology investments such as wayside inspection systems and track testing vehicles.

Wednesday, Feb. 8, 2017 Westwood Holdings-WHG reported fourth quarter revenue dipped 2% to $31.1 million with net income up 62% to $7.6 million and EPS up 59% to $.92. (Last year’s results included $1.8 million in charges related to compensation and taxes.) For the full 2016 year, revenues declined 6% to $123 million with net income down 16% to $22.6 million and EPS down 17% to $2.77. The revenue decrease for the year was due to a $7.8 million decline in asset-based advisory fees reflecting lower average assets under management coupled with a $2.1 million decrease in performance-based advisory fees, partially offset by a $1.5 million increase in Trust fees due to a full year of revenue reported by Woodway. Assets under management totaled $21.2 billion at 12/31/16 compared to $20.8 billion at the end of the prior year. Return on shareholders’ equity for the year was 15.5%. Free cash flow declined 16% during the year to $45.6 million due to the lower earnings and working capital changes. Westwood repurchased $5.6 million of its shares during the year and paid $19.4 million in dividends.  During the fourth quarter, the company increased its dividend 9% with the dividend currently yielding 4.5%. The company ended the year with $90.2 million in cash and investments and no long-term debt. Management remains committed to their time-tested investment philosophy of focusing on quality businesses with strong balance sheets and attractive valuations, which they believe will produce superior risk-adjusted returns over the long term.  

The UPS-UPS Board of Directors declared a 6% increase in the regular quarterly dividend to $0.83 per share on all outstanding Class A and Class B shares. The dividend is payable March 8, 2017, to shareowners of record on Feb. 21, 2017. “UPS has a long history of growing our dividend,” said David Abney, UPS chairman and CEO. “Dividends are a priority use of capital, and our robust cash from operations enables us to simultaneously strengthen the business and provide a strong return to our shareholders.” For more than four decades, UPS has either increased or maintained its dividend. Since 2000, its dividend has more than quadrupled.

Cognizant Technology Solutions-CTSH reported fourth quarter revenues rose 7% to $3.5 billion with net income down 2% to $416 million and EPS down 1% to $.68. For the full year 2016, revenues rose 8.6% to $13.5 billion with operating income up 6.7% to $2.3 billion and net income and EPS each down 4% to $1.6 billion and $2.55, respectively. The lower net earnings reflected the impact of higher taxes related to the repatriation of $1 billion in cash during the year. During 2016, revenue growth was driven by 13.5% growth in both the Manufacturing/Retail/Logistics and Other business segments and on a geographic basis by 18% growth in Europe, excluding the United Kingdom where growth declined 1%, and 23% growth in the rest of the world, excluding North America where growth increased 8%. Return on shareholders’ equity for the year was a solid 14%. Spurred by Elliott Management, a large activist investor, Cognizant announced plans to accelerate its shift to digital services and solutions, which currently comprise 23% of total revenues. This shift is expected to help the company expand its non-GAAP operating margin from 19.5% to 22% by 2019. The company also announced plans to return $3.4 billion of capital through dividends and share repurchases over the next two years. Cognizant expects to initiate a $.15 per share dividend beginning in the second quarter of 2017, with the dividend expected to yield about 1% based on the current stock price. In addition, the company plans to commence a $1.5 billion accelerated share repurchase program in the first quarter of 2017 and repurchase shares of $1.2 billion in the open market during 2017 and 2018. Beginning in 2019, the company plans to return approximately 75% of free cash flow on an ongoing basis to shareholders through a combination of dividends and share repurchases. At year end, the company had more than $5 billion in cash, with $1 billion held in the U.S., and $797 million in long-term debt on its balance sheet. The company’s planned capital return program will be funded by current U.S. cash balances, future cash flows from U.S. operations and incremental debt financing if necessary. Full year 2017 revenues are expected to be in the range of $14.56 to $14.84 billion, representing 8% to 10% growth, with non-GAAP EPS expected to be at least $3.63. When asked about potential restrictions of skilled immigration into the U.S., Cognizant said it needs to attract and retain the best talent in the world. Last year, Cognizant hired 4,000 U.S. citizens to work in its 20 U.S. based delivery centers. The company would like to continue to aggressively expand its U.S. workforce by training and re-skilling U.S. workers with the requisite technology skills needed. It is too speculative to assume any impact from changes to work visas at this time. Management is cautiously optimistic that higher interest rates and the potential rollback of Dodd-Frank regulations will help its financial customers increase their spending habits, but it is still too early to see an impact. Healthcare customers are still cautious about potential healthcare reform, but Cognizant is still seeing a pick up in business on discretionary spending by these customers.

Tuesday, Feb. 7, 2017 Gilead Sciences-GILD reported fourth quarter revenues declined 14% to $7.3 billion with net income down 34% to $3.1 billion and EPS down 26% to $2.34. For the full year 2016, revenues declined 7% to $30.4 billion with net income down 25% to $13.5 billion and EPS down 17% to $9.94 on lower shares outstanding. Sales declined due to lower sales of the company’s Hepatitis C (HCV) products, Harvoni and Sovaldi, due to the changing dynamics in the HCV market around the globe. Earnings have been pressured by competitive and pricing pressures with Gilead offering generous rebates on its Harvoni product resulting in a cost of $15,000 per bottle or $10,000 per bottle for Medicaid patients.  With the company’s HCV products curing patients in as little as eight weeks, the sickest patients have been cured and no longer need its products. The number of new patients starting the treatment regimen is lower than the company anticipated resulting in a sharp drop in Gilead’s forecasted sales for 2017 with net product sales expected in the range of $22.5 to $24.5 billion, which would be 19% to 26% lower than 2016 sales. While HIV product sales are expected to rise 16% to 20% thanks to new product launches, HCV sales are expected to plummet 40% to 50% from 2016 sales due to the lower patient starts around the globe and competitive pressures. Sales growth may not resume in 2018 without an acquisition as the company has few new product launches in the next few years and faces further patent expirations. Gilead’s cash flow remains strong with the company generating $16.7 billion in cash flow from operations in 2016. Gilead used $2.5 billion of the cash to pay dividends during the year and repurchased 123 million shares of its stock for $11 billion at an average price of $89.43 per share. Gilead will curtail its share repurchases in 2017 but did recently increase its dividend 10%, reflecting management’s confidence in the strength of its future business and cash flows. The company ended the year with $32 billion in cash and $28 billion in long-term debt on its balance sheet. Management believes the company has the financial resources to make future attractive acquisitions.  Return on shareholders’ equity for 2016 was 70% with return on total capital at 28%.

The Walt Disney Company-DIS reported first fiscal quarter revenues dipped 3% to $14.8 billion with net earnings declining 14% to $2.5 billion and EPS falling 10% to $1.55 on fewer shares outstanding. By segment, Media Networks revenue fell 2% to $6.2 billion and segment operating income declined by 4% to $1.4 billion, pressured by higher programming costs and lower advertising revenues at ESPN. The programming cost increase was driven by contractual rate increases for NBA and NFL programming. Lower advertising revenue resulted from lower rates and a decrease in average viewership. Given ESPN’s strong brand and Disney’s entrance into direct-to-consumer platforms like Hulu and BAMTech, CEO Robert Iger believes that Disney will eventually benefit from the disruption in the cable business. Parks and Resorts revenue increased 6% to $4.6 billion and segment operating income increased 13% to $1.1 billion. The opening of Shanghai Disney Resort in the third quarter of fiscal 2016 and higher domestic resort guest spending helped boost segment revenues. Shanghai Disney has become a destination resort for all of China, accommodating about 7 million guests to date with 10 million guests expected to visit the resort by its first anniversary. Studio Entertainment revenues declined 7% to $2.5 billion and segment operating income fell 17% to $842 million. Difficult comps on the heels of last year’s home entertainment release of Frozen and Star Wars Classic titles along with last year’s exceptional box office take from Star Wars: The Force Awakens accounted for year-over-year declines. Consumer Products & Interactive Media revenues fell 23% to $1.5 billion and segment operating income dropped 25% to $642 million. These lower segment results were attributed to the difficult comps created by Star Wars and Frozen merchandise sales in the year-ago quarter and the discontinuation of the Infinity console game business.  Disney generated $220 million in free cash flow during the quarter, down from $1.1 billion generated during the same period last year. A $1.3 billion pension plan contribution was called out by management as the reason for the drop in free cash flow. During the quarter, Disney repurchased 15 million shares for $1.5 billion, or $100 per average share. For the full year, Disney expects to repurchase $7 to $8 billion of its shares. Disney ended the quarter with about $8 billion in cash and investments and about $15 billion in long-term debt on its sturdy balance sheet. 

The 3M-MMM Board of Directors declared a dividend on the company’s common stock of $1.175 per share for the first quarter of 2017, an increase of 6 percent over the quarterly dividend paid in 2016. The dividend is payable March 12, 2017, to shareholders of record at the close of business on Feb. 17, 2017. This marks the 59th consecutive year 3M has increased its dividend. The company has paid dividends to its shareholders without interruption for 100 years. During the past decade, 3M has returned $49 billion to shareholders through a combination of dividends and gross share repurchases, or 113 percent of reported net income.

The Priceline Group-PCLN announced that it has signed a definitive agreement to acquire the Momondo Group in a cash transaction for a price of $550 million. The Momondo Group, which operates momondo, a leading European travel meta engine that offers flights, hotels and car rentals, and Cheapflights, a leading global flight comparison and travel deals publishing platform, will roll under The Priceline Group's leading travel meta brand, KAYAK. The deal is expected to close later in the year.

Michael Kors-KORS reported disappointing third quarter results with total revenue declining 3% to $1.4 billion and net earnings dropping 8% to $271.3 million with EPS up 3% to $1.64 on lower shares outstanding. During the quarter, the company repurchased 2.1 million shares for approximately $100 million. Retail net sales increased 9% to $836.7 million due primarily to 193 net new store openings, including 143 stores associated with the company’s recent acquisitions of previously licensed operations in Greater China and South Korea. Comparable store sales decreased 6.9% during the quarter. Wholesale net sales decreased 18% to $473.1 million with licensing revenue plummeting 22% to $43 million. Total revenue in the Americas decreased 7% to $983.9 million and European revenue decreased 7% to $256.7 million. Revenue in Asia increased 89% to $112.3 million due to the acquisitions of licensed operations in Greater China and South Korea. The poor comparable store sales performance during the quarter was due to reduced traffic trends in shopping malls, currency fluctuations, uncertainty surrounding certain political changes in European countries, including Brexit, and the implementation of reduced promotional activity in North America. These challenging retail headwinds are expected to persist for the remainder of fiscal 2017 and throughout fiscal 2018, which will continue to negatively impact sales. As a result, the company reduced its sales and earnings outlook for fiscal 2017 with total revenue now expected to approximate $4.48 billion with comparable sales expected to decline in the high-single-digit range with EPS expected in the range of $4.09-$4.13 or 7%-8% lower than last year.

Monday, Feb. 6, 2017 Stryker Orthopaedics Corp, a unit of Stryker-SYK, has been awarded a $486 million contract for orthopedic products, the Pentagon said in a statement.

Express Scripts'-ESRX efforts to put medicine within reach for payers and patients effectively held the 2016 growth rate in prescription drug spending to just 3.8 percent – a 27 percent decrease from 2015 – according to the 21st edition of its annual Drug Trend Report. "In a year where the issue of high drug prices was No. 1 on the list of payer and policy maker concerns, the data show that our solutions protected our clients and patients," said Glen Stettin, M.D., Chief Innovation Officer at Express Scripts. "By practicing pharmacy smarter, we uniquely make medicine more affordable and accessible for patients.  We do this by driving down drug prices and ensuring appropriate use of clinically-proven medicine, while helping employers remain competitive." Between 2015 and 2016, nearly half of employers whose pharmacy benefits were managed by Express Scripts saw a year-over-year increase in per-person spending of less than 3.7 percent, and one-third of employers had a decrease in pharmacy spending. Express Scripts programs ensure patient access, minimize waste and maximize savings. On average, employers who managed their pharmacy benefits more tightly with these programs held their 2016 increase in drug spending to 2.6 percent – significantly lower than less tightly managed pharmacy plans.  If all pharmacy plans across the country tightly managed their benefit, the United States could have saved an additional $5.8 billion on prescription drugs last year, while maintaining a clinically sound and affordable pharmacy benefit for American patients. Commercial plans managed by Express Scripts experienced only a 2.5 percent increase in unit costs across all prescription medications – nearly 22 percent lower than 2015, and more than 60 percent lower than the increase in prices, net of rebates, recently reported by major drug makers. "Rebates do not raise drug prices, drug makers do," said Dr. Stettin. "As demonstrated by lower overall and unit cost trend in 2016, Express Scripts is effective in protecting employers from the effects of inflation by using our focused size and scale to secure significant rebates, which are returned to employers to reduce the overall cost of their pharmacy benefit."

Fluor-FLR announced that Guinea Alumina Corporation S.A. (GAC) has awarded Fluor an engineering and program management consultancy contract for a major bauxite mine in the Boké region of Guinea, Africa. Fluor booked the approximately $700 million contract value into backlog in the fourth quarter of 2016.

Fastenal-FAST reported January sales increased 9% to $336 million with average daily sales up 4% to $16 million. Manufacturing customer sales growth was up 4.7% during the month with non-residential construction customer sales down .1%.  Fasteners sales declined 1.9% during the month with other sales up 7%.  During January, the company opened two new stores and ended the month with 2,505 store locations. Total personnel at month end were 19,637, a decline of 5.3% year over year.

Friday, Feb. 3, 2017 Qualcomm-QCOM and TDK Corporation announced the completion of the previously announced joint venture under the name RF360 Holdings.  The joint venture will enable Qualcomm’s RFFE Business Unit to deliver RF front-end (RFFE) modules and RF filters into fully integrated systems for mobile devices and fast-growing business segments, such as Internet of Things (IoT), automotive applications, connected computing, and more. Together with RF360 Holdings, Qualcomm Technologies, Inc. (QTI) will be ideally positioned to design and supply products with end-to-end performance and global scale from the modem/transceiver all the way to the antenna in a fully integrated system. RF360 Holdings will initially be owned 51 percent by Qualcomm Global Trading PTE. Ltd. (QGT) and 49 percent by EPCOS AG (EPCOS). QGT has an option to acquire (and EPCOS has an option to sell) the remaining interest in the joint venture 30 months after the closing date. Giving effect to the payment made at closing, additional future payments to TDK based on sales by the joint venture of RF filter functions, as well as Qualcomm and TDK’s joint collaboration efforts, and assuming QGT’s exercise of its option to acquire EPCOS’ interest in the joint venture, the aggregate transaction value is expected to be approximately $3 billion US dollars. Qualcomm expects the transaction to be accretive to Non-GAAP earnings per share in the 12 months following the transaction close. 

Thursday, Feb. 2, 2017 Becton Dickinson-BDX reported first quarter net revenue declined 2% to $2.9 billion with net income and EPS both more than doubling to $562 million and $2.58, respectively. The revenue decline reflected the divestiture of the Respiratory Solutions business. On a comparable, currency-neutral basis, revenues grew 6% during the quarter driven by 5.5% revenue growth in the U.S. to $1.6 billon and 6.8% revenue growth in international markets to $1.3 billion. Growth in China was up 9% with emerging markets growth up 8%.  Both the Medical and Life Sciences business segments contributed to the growth led by 12% growth in the Medication Management Solutions unit and 9% growth in Biosciences. The 143% gain in EPS was primarily due to a litigation reserve reversal following a favorable appellate antitrust ruling. Adjusted EPS growth was a still healthy 19% during the quarter thanks to robust margin expansion from operational efficiencies and favorable product mix. During the quarter, the company paid down $500 million in debt assumed for the CareFusion acquisition. Management’s capital allocation policy for the expected $2 billion in free cash flow this year is to continue to reduce debt, replenish working capital and grow the dividend with share repurchases expected to be minimal. The company’s updated outlook for fiscal 2017 is for reported sales to decrease 3.5% to 4% due to the divestiture, with comparable, currency-neutral revenues expected to increase 4.5% to 5.0%. As reported EPS is expected in the range of $7.90 to $8.00, representing growth of 76% to 78% with adjusted EPS expected in the range of $9.35 to $9.45, representing growth of 9% to 10% over fiscal 2016 adjusted EPS. Management noted that potential tax reform would be positive for the company, especially the border adjusted tax (BAT) as the company is a net exporter with 30 manufacturing plants in the U.S.

Wednesday, Feb. 1, 2017 Baxter International-BAX reported fourth quarter sales of $2.6 billion, up 2% year-over-year, with net earnings from continuing operations of $240 million and EPS from continuing operations of $.44. Excluding special items, Baxter’s fourth quarter income from continuing operations totaled $312 million or $.57 per share. Domestic sales advanced 5% to $1.1 billion while international sales decreased 1% to $1.5 billion.  Adjusting for the impact of foreign exchange and generic competition for cyclophosphamide, Baxter’s sales increased 7% in the U.S. and rose 3% globally in the fourth quarter. By business, Hospital Products sales of $1.6 billion increased 1% due to strong sales of IV therapies, infusion pumps and related IV access administration sets in the U.S., along with favorable demand for anesthesia and critical care products globally.  Baxter’s Renal sales totaled $1 billion, up 3% year-over-year driven by robust sales of peritoneal dialysis products as well as increased demand for the company’s acute renal care products.  For 2016, Baxter reported income from continuing operations of approximately $5 billion, or $9.01 per diluted share, on a GAAP basis. These results included a gain of $4.4 billion (on a pre and post-tax basis), related to the company’s disposition of its retained Baxalta shares. Baxter generated $1.6 billion in operating cash flow, an increase of $371 million, or 30%, driven by improved operational performance and implementation of new programs focused on improving the company’s working capital. Free cash flow jumped 165% to $905 million thanks to the operating cash flow growth and disciplined capital expenditures. During the year, the company increased its dividend 13% and repurchased $300 million of its stock. The significant improvement in free cash flow generation supports the company’s ability to reinvest in the business both organically and through acquisitions to drive accelerated future growth. Looking ahead to 2017, Baxter expects reported sales comparable to the prior year with earnings in the range of $1.52 to $1.67. This guidance excludes any impact from the company’s proposed acquisition of Claris which is expected to close in the second half of 2017 and expand the company’s presence in the generic injectables space.  Baxter stated they expect minimal impact to the company from potential healthcare reform.  Although hospitals may pause on new capital expenditures, Baxter’s pumps are not discretionary expenditures.

Automatic Data Processing-ADP reported fiscal second quarter revenues rose 6% to $3 billion with net income up 50% to $510.9 million and EPS up 53% to $1.13. These results included a pre-tax gain of $205 million from the sale of its Consumer Health Spending Account (CHSA) and COBRA businesses. Adjusting for the gain, EPS increased 20% during the quarter. Operating margin expanded 180 basis points in the quarter to 19.8% driven by operational efficiencies and slower growth in selling expenses. Free cash flow rose 73% during the first half of the year to $721 million thanks to the higher earnings and improvements in working capital. The company paid $482 million in dividends and repurchased $765 million of its share during the first half of fiscal 2017. Subsequent to quarter end, ADP acquired The Marcus Buckingham Company for $70 million in cash and contingent consideration of up to $35 million, payable over the next three years. This solid performance occurred despite pressure from new business bookings which declined 5% during the quarter. The decline was driven by tough comparisons with last year which received a tailwind from additional sales in fiscal 2016 of modules related to the Affordable Care Act, which represents about $150-$200 million of current sales. With the potential repeal of Obamacare following the election, client uncertainty related to regulations reached an elevated level which also contributed to the drop in new business bookings. ADP management believes new business bookings pressure will begin to subside as the year progresses as changes in regulations are clarified. However, given the decline in new business bookings during the quarter, ADP now assumes worldwide new business bookings to be about flat with the $1.75 billion sold in 2016 compared to the prior forecast of 4%-6% growth. ADP now expects full year revenue growth of about 6% compared to the prior forecast of 7%-8% growth, reflecting in part 1% pressure from the sale of the CHSA and COBRA businesses. ADP continues to expect EPS growth of 15%-17% for the full year, or 11%-13% growth on an adjusted basis which reflects operating margin expansion of 50 basis points. ADP increased their share buyback forecast to $1.2-$1.4 billion funded by existing cash on the balance sheet. While healthcare reform is still uncertain, ADP expects that people will maintain their healthcare insurance but it may be more state-based and tax credit oriented. ADP will help clients navigate the changes, which will be good for business. Small business optimism is very high thanks to a positive economic environment which should also benefit ADP as the company helps clients attract and retain employees in a tightening labor market.

Private sector employment increased by 246,000 jobs from December 2016 to January 2017 according to the January ADP National Employment Report®. "The U.S. labor market is hitting on all cylinders and we saw small and midsized businesses perform exceptionally well," said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. "Further analysis shows that services gains have rebounded from their tepid December pace, adding 201,000 jobs. The goods producers added 46,000 jobs, which is the strongest job growth that sector has seen in the last two years." Mark Zandi, chief economist of Moody's Analytics said, "2017 got off to a strong start in the job market. Job growth is solid across most industries and company sizes. Even the energy sector is adding to payrolls again."

Biogen-BIIB announced the completion on February 1, 2017 of the separation of its global hemophilia business. The new company, known as Bioverativ, is an independent, publicly traded global biotechnology company focused on hemophilia and other rare blood disorders. On December 20, 2016, Biogen announced that its board of directors approved the separation of Biogen and Bioverativ, and declared a special dividend distribution of one share of Bioverativ common stock for every two shares of Biogen common stock held. 

Tuesday, Jan. 31, 2017 Apple-AAPL reported fiscal first quarter revenues rose 3% to a record $78.4 billion with net income dipping 3% to $17.9 billion and EPS up 2% to a record $3.36 on lower shares outstanding. International sales accounted for 64% of the quarter’s revenues with solid growth in all geographic segments other than Greater China, where sales declined 12% due to tough comparisons. On a product basis, iPhone revenues grew 5% to $54.4 billion as units grew 5% to a record 78.3 million units. The average selling price for the phone rose 12% to $695 due to strong product mix with the iPhone 7 plus experiencing exceptional demand. Apple was supply constrained for the Iphone and Mac during the quarter. Mac sales returned to growth in the quarter with revenues up 7% to $7.2 billion on unit growth of 1% to 5.4 million units. Services experienced a record quarter with revenues up 18% to $7.2 billion. Apple expects the Services unit to achieve Fortune 100 status this year with sales expected to double in this unit over the next four years. The App Store broke records with $3 billion in purchases for the month of December alone with more than 2.2 million apps available at the store. The development community has earned more than $60 billion by developing apps for the App Store, including $20 billion in 2016. Apple Pay has also had strong results with the number of users more than tripling as billions of dollars were transacted in December alone through Apple Pay with the transaction volume up 500% year-over-year as the service expanded into four new countries with the service now available in 13 markets. The Apple Watch had its best quarter ever during the holiday season with the company not able to keep up with demand for the best-selling smart watch on the market. The AirPods also experienced incredible demand with Apple working hard to keep up with the strong demand. Along with the Beats headphones, Apple has a rich line of wearable products which should experience huge future growth. Apple’s ecosystem is broadening into the home, auto, gym and health sectors with Apple’s CEO, Tim Cook, believing that we are still in the early innings of the smartphone market. Apple generated $24 billion in free cash flow during the year, relatively stable with last year. The company paid $3.1 billion in dividends and repurchased $11 billion of its shares during the quarter and reduced its outstanding shares by 65.3 million during the quarter. Cumulatively, Apple has repurchased $144 billion of its shares since the inception of the program. Apple ended the quarter with $246 billion of cash and investments, with 94% of the cash held offshore, and $74 billion in long-term debt. Tim Cook, Apple’s CEO, is optimistic that there will some type of corporate tax reform, which would include repatriation of foreign cash holdings.  Apple believes repatriation of foreign cash holdings would be very good for the country and for Apple. In response to a question on the litigation brought against Qualcomm-QCOM, Apple said they viewed the litigation as a last resort. Apple believes Qualcomm is insisting on charging royalties for technologies that they had nothing to do with such as Apple’s cameras. Tim Cook likened Qualcomm’s royalty practices as charging a sofa’s price based on the price of the house it was placed into, which does not make sense to him. In addition, Qualcomm has withheld $1 billion they owe Apple as part of the “radical steps” they were taking so Apple felt that there was nothing other than litigation to settle the dispute, which may be a long process. The company’s second fiscal quarter outlook is for revenues in the range of $51.5 to $53.5 billion with gross margin between 38% and 39%, operating expenses between $6.5 billion and $6.6 billion and a tax rate of 26%.

Mastercard-MA reported fourth quarter net revenue charged up 9.5% to $2.8 billion with net income increasing 5% to $933 million and EPS up 9% to $0.86.  Net revenue growth was driven by the impact of a 17% increase in switched transactions to $15.2 billion, a 9% increase in gross dollar volume to $1.2 trillion and an increase in cross-border volumes of 13% to $910 million. These factors were partially offset by rebates and incentives of $1.4 billion, up 20%, primarily due to new and renewed agreements and increased volumes. As of December 31, 2016, Mastercard’s customers had issued 2.3 billion Mastercard and Maestro-branded cards, up 6% year-over-year. During the fourth quarter, Mastercard repurchased about 11 million shares for $1.1 billion, or $100 per average share. Subsequent to quarter end through January 26th, Mastercard repurchased an additional 2.3 million shares for $247 million, or $107.39 per average share, with $4.7 billion remaining under the current authorization. For the full year, Mastercard reported net revenue of $10.8 billion, up 11%, or 13% on a currency-neutral basis, with net income up 7% to $4.1 billion and EPS up 10% to $3.69.  During 2016, Mastercard generated $4.27 billion in free cash flow, representing 105% of reported net income, a sign of high-quality earnings.  Mastercard ended the year with $8.3 billion in cash and investments and $5.2 billion in long-term debt. During 2016, Mastercard generated a stellar 71.8% return on shareholders’ equity and an impressive 21.8% return on invested capital. Management sees encouraging signs in Europe, most notably in Germany, stability in the UK despite Brexit angst, and signs that Brazil is emerging slowly on the long road to recovery. Management remains cautious about Asia with China’s economy slowing and Australia’s economy weak in both commercial and consumer sectors. Post-election confidence is high in the U.S. When asked about the likely impact of Trump administration policies, Ajay Banga, Mastercard president and CEO, stated that they will likely be a net positive for Mastercard’s business.  President Trump’s genuine concern about excessive regulations becoming millstones for businesses may result in reduced regulations that will likely help merchants and banks that are Mastercard customers. Investment in physical and digital infrastructure will increase the velocity of money, thereby creating a constructive environment for Mastercard. With a tax rate that hovers around 28% to 29%, discussions about tax reform is also encouraging as any reduction in taxes will fall directly to the company’s bottom line. As for the proposed border tax, given that Mastercard develops most of its intellectual property in the U.S., it is a net exporter of services and is unlikely to be hurt directly by a border tax.  Looking ahead to the full year, 2017 currency neutral revenue is expected to increase in low-double digits with foreign currency expected to shave 2% from top-line growth resulting in high-single digit reported revenue growth. Operating expenses are expected to increase in the mid-single digit range.

UPS-UPS reported fourth quarter  revenue rose 6% to $16.9 billion with the company reporting a loss of $239 million for the quarter or ($.27) per share due to a non-cash, mark-to-market pension charge resulting from a lower discount rate and pension asset returns. Adjusting for the pension charge, net income and EPS rose 3% and 4%, respectively, over adjusted earnings in the prior year quarter. Revenue and volume growth accelerated during the holiday season with U.S. domestic revenue driven by Ecommerce and International export shipments soaring 8%, led by the Asia and Europe regions. The International group reported its 8th consecutive quarter of double-digit profit growth with the U.S. segment hampered by a slowdown in industrial production and a significant shift in product mix from commercial customers to consumers resulting in lower prices per package. During the fourth quarter, UPS delivered 1.4 billion packages, up 7% over last year. During the peak holiday season, UPS delivered 712 million packages, which was up 16% over the prior year thanks to record volume from the strong and steady Ecommerce boom. During the fourth quarter, UPS delivered to 2.5 million new addresses, which highlights the expanding reach of Ecommerce.  For the full year, UPS generated a record $61 billion in revenues, up 4%, with net income declining 29% to $3.4 billion and EPS off 28% to $3.87 due to the pension charge. On an adjusted basis, net income increased 4% during the year with EPS up 6%. During the year the company produced $6.5 billion in cash flow from operations and reinvested $3 billion in capital expenditures with free cash flow of $3.5 billion. The company paid $2.8 billion in dividends during the year, a 7% increase over the prior year, and repurchased 25.5 million shares for approximately $2.7 billion at an average price of $105.88 per share. Management’s has a positive global economic outlook for 2017 with revenues expected in the range of $65.8-$67 billion, representing 8%-10% growth, with  EPS expected in the range of $5.80 to $6.10, which represents 1% to 6% growth over adjusted 2016 results. This EPS range includes an expected $400 million of pre-tax currency headwinds with the currency headwind lowering the adjusted EPS by $.30 per share and lowering the growth rate by 5%. UPS plans to increase its investments in capital expenditures in 2017 to $4 billion to increase capacity and improve operating efficiencies. The company is committed to growing its dividend but will likely pull back on its share repurchases to about $1.8 billion in 2017 given its higher capital spending plans. Management expects U.S. GDP growth to be slightly higher in 2017 than in 2016 with double-digit Ecommerce growth continuing and industrial production shifting from negative growth to slightly positive growth. UPS supports tax reform as lower tax rates will encourage investments. Creating a world class infrastructure in the U.S., especially at airports, would also improve efficiency and help UPS’s operations. Reduced regulations would also result in a more vibrant U.S. economy. UPS supports free trade agreements and believes the Trump administration also does but is looking for fairer trade agreements for the U.S. not the elimination of trade agreements.

Monday, Jan. 30, 2017 Walgreens Boots Alliance-WBA and Rite Aid Corporation announced that they have entered into an amendment and extension of their previously announced definitive merger agreement under which Walgreens Boots Alliance will acquire all outstanding shares of Rite Aid, a U.S. retail pharmacy chain. Under the terms of the amendment, the parties have agreed to reduce the price for each share of Rite Aid common stock to be paid by Walgreens Boots Alliance. The revised price will be a maximum of $7.00 per share and a minimum of $6.50 per share. In addition, Walgreens Boots Alliance will be required to divest up to 1,200 Rite Aid stores and certain additional related assets if required to obtain regulatory approval. The exact price per share will be determined based on the number of required store divestitures, with the price set at $7.00 per share if 1,000 stores or fewer are required for divestiture and at $6.50 per share if 1,200 stores are required for divestiture. If the required divestitures fall between 1,000 and 1,200 stores, then there will be a pro-rata adjustment of the price per share. Walgreens Boots Alliance agreement to divest up to 1,200 Rite Aid stores represents an increase of up to 200 stores over the 1,000 stores that Walgreens Boots Alliance had agreed to divest under the terms of the original agreement. Additionally, Walgreens Boots Alliance and Rite Aid agreed to extend the end date under the previously announced agreement from 27 January 2017 to 31 July 2017 in order to allow the parties additional time to obtain regulatory approval. Based on the terms and conditions of the Amendment, the Walgreens no longer expects any material accretion from Rite Aid in fiscal year 2017. This takes into account the extended timeframe for closing, the updated potential store divestitures, and the new per share merger consideration. Accordingly, Walgreens Boot Alliance lowered the high end of fiscal 2017 EPS guidance: $4.90-5.08 from $4.90-5.20.  The company continues to expect that it will realize synergies from the acquisition of Rite Aid in excess of $1 billion, to be fully realized within three to four years of the closing of the merger.

Friday, Jan. 27, 2017 Gentex-GNTX reported fourth quarter revenues rose 4% to $420 million with net income relatively flat at $88.8 million and EPS up 3% at $.31. For the full 2016 year, revenues rose 9% to $1.7 billion with net income increasing 9% to $347.6 million and EPS up 10% to $1.19. Return on shareholders’ equity for the year reflected a solid 18.2%. Unit shipment growth of auto-dimming interior and exterior rearview mirrors increased 4% in the fourth quarter and 9% for the full year. During the fourth quarter, a plastic raw material shortage used in its mirrors impacted the ability of the company to meet full customer demand, resulting in a negative impact to unit shipments and revenue for the quarter. The raw material shortage along with customer shutdowns and inventory adjustments during the quarter negatively impacted fourth quarter revenues by $15 million. These issues were one-time items that have been resolved subsequent to year end.  Free cash flow motored 38% higher to $350.5 million during the year thanks to the higher earnings and working capital changes. During the year, the company repurchased 10.3 million of its common stock at an average price of $15.85 per share with 6.7 million shares remaining authorized for future share repurchases. In addition, the company repaid $47.5 million of its debt during the year ending the year with $178 million in long-term debt and more than $773 million in cash and long-term investments on its strong balance sheet. Total light vehicle production is forecast to increase 1% in 2017 and 2018. Based on these forecasts, Gentex expects their 2017 revenue will increase 6% to 10% to a range of $1.78 to $1.85 billion with revenues in 2018 also expected to increase 6% to10% over 2017 revenue estimates. Gross margin in 2017 is expected in the range of 39%-40% with operating expenses of $165-$172 million and a tax rate of 31.5% to 32.5%. Proposed changes to the corporate tax rate would be a big benefit to Gentex and result in the company reinvesting more in their business especially in more engineering talent as they focus on connected car technologies and iris authentication as biometric solutions for car security and capabilities. Capital expenditures in 2017 are expected in the range of $115 million to $130 million compared to the $121 million spent in 2016.

AbbVie-ABBV reported fourth quarter revenues rose 6% to $6.8 billion with operating income up 12% to $2.4 billion and net income and EPS each down 8% to $1.4 billion and $.85, respectively, primarily due to a higher tax rate. For the full year 2016, AbbVie’s revenues rose 12% to $25.6 billion with net income and EPS each up 16% to $6 billion and $3.63, respectively. During the fourth quarter, global HUMIRA sales increased 16% with U.S. HUMIRA sales up 24% and international HUMIRA sales up 4% as biosimilar competition impacted results. Strong HUMIRA sales growth was driven by continued momentum across all three major market categories-rheumatology, dermatology and gastroenterology. Fourth quarter IMBRUVICA sales grew strongly to $511 million with global net sales topping $1.8 billion for the full year. IMBRUVICA has been approved to treat five unique types of blood cancers. AbbVie spent 17.5% of net revenues in the fourth quarter on research and development as the company continues to invest in their advancing product pipeline to drive long-term sustainable growth. Management expects strong growth to continue with the outlook for EPS in 2017 in the range of $4.55-$4.65, representing growth of 25% to 28%. On an adjusted basis for specified items, EPS growth of 13.9% is expected at the midpoint. Management reaffirmed its long-term objective of double-digit EPS growth on average each year through 2020 with operating margins expanding to 50% of sales.

Thursday, Jan. 26, 2017 Starbucks Corporation-SBUX reported first fiscal quarter revenues increased 7% to a record $5.7 billion with net income increasing 9% to $752 million and EPS increasing 11% to $0.51. Comp store sales grew by 3%, comprised of 5% comp sales growth in China Asia Pacific (CAP), a 1% decline in Europe, Middle East and Africa (EMEA) and 3% growth in the Americas. U.S. same store sales consisted of 5% increase in average ticket and a 2% decline in transactions. This disappointing transaction decline was caused, in part, by the success of Starbucks’ Mobil Order & Pay technology which represented 7% of U.S. transactions, up from 3% last year. Mobile Payments accounted for 27% of U.S. transaction in 1,200 stores, up from 13 stores last year. Starbucks’ mobile strategy was intended to reduce customer wait time at the cash register. However, during the quarter, the bottle-neck was moved to the pick-up counter and resulted in many incomplete transactions. Management is working with store designers and managers to clear to bottlenecks. In addition, Starbucks card loads in the U.S. and Canada jumped 15% to a record $2.1 billion during the quarter. These sales, and the corresponding transactions, will be booked when the card loads are spent, which should boost same store sales during the next few quarters. During the quarter, Starbucks opened 649 net new stores, bringing the total stores to 25,734 in 75 countries. By segment, Americas revenues increased 7% to $4 billion and generated operating profits of 24%, down 110 basis points on higher pay for store employees. CAP sales increased 18% to $771 million, driven by incremental revenues from 1,003 net new stores added during the past twelve months. CAP operating margins increased 180 basis points to 21.2%, primarily due to changes in China’s business tax structure and higher income from joint ventures. EMEA sales declined 16% to $262 million due to the shift to more licensed stores, which also nudged operating margins up by 140 basis points to 16.8%.  Channel Development sales increased 8% to $554 million on industry-setting sales pace of premium single-serve and packaged coffee products. Operating margins increased 620 basis points to 44%, jolted by lower coffee prices.  Looking ahead to the full fiscal year, management anticipates opening 2,100 net new stores globally and achieving mid-single-digit global comp store growth with EPS in the range of $2.09 to $2.11, up 11% year-over-year at the midpoint. Revenues growth is expected in the range of 8% to 10%, down from previous guidance of double-digit growth.

Microsoft-MSFT reported fiscal second quarter revenues rose 1.2% to $24 billion with net income up 4% to $5.2 billion and EPS 6% higher to $.66. On an adjusted constant-currency basis, revenue rose 4% with net income up 10% and EPS up 13%. Revenue in Productivity and Business Processes grew 10% (up 12% constant currency) to $7.4 billion as Office 365 consumer subscribers increased to 24.9 million. The LinkedIn acquisition contributed 3% points of growth. Revenue in Intelligent Cloud grew 8% (up 10% in constant currency) to $6.9 billion with Azure revenue up 93% as Azure compute usage more than doubled year over year.  Azure is Microsoft’s cloud platform which businesses can use to host website, applications or data. Revenue in More Personal Computing declined 5% (down 4% in constant currency) to $11.8 billion as Windows commercial products and cloud services revenue grew 5%, Phone revenue declined 81% and Gaming revenue declined 3%. The company reported free cash flow of $4.3 billion, up 20% year over year, with the company ending the quarter with $123 billion in cash and investments and $59 billion in long-term debt. During the first half of the fiscal year, the company repurchased $8 billion of stock and paid $5.8 billion in dividends. The second quarter results showed continued demand for Microsoft’s cloud-based services with commercial cloud annualized revenue running at a rate exceeding $14 billion with the company on track to achieve $20 billion in cloud revenues in fiscal 2018.

Alphabet-GOOGL reported fourth quarter revenues rose 22% to $26 billion with net income up 8% to $5.3 billion and EPS up 7% to $7.56. This performance was led by mobile search and YouTube. On a geographic basis, revenues rose 24% in the U.S. to $12.7 billion. U.K. revenues rose 7% to $2.1 billion, which would have been up 21% on a constant currency basis. The rest of the world revenues rose 24%, or 26% on a constant currency basis, to $11.3 billion. Google segment revenues rose 22% to $25.8 billion with operating income up 17% to $7.9 billion during the quarter. Aggregate paid clicks jumped 36% during the quarter with aggregate cost-per-click down 15%. Other Bets revenues rose 75% to $262 million with the operating loss narrowing to $1.1 billion during the quarter.  For the full year, Other Bets revenue rose 82% to $809 million with an operating loss of $3.6 billion. In the Other Bets segment, Waymo, the driverless car unit, will become a standalone division thanks to the commercialization of its products. Nest had an outstanding Christmas holiday season with key product sales more than doubling. Verily received an $800 million minority investment from a Singapore investment fund due to promising potential in the biomedical unit.  Return on shareholders’ equity for 2016 was 14%. Free cash flow increased 55% during the year to $25.8 billion with the company repurchasing $3.6 billion of its own shares during the year. Due to trading restrictions, the company did not repurchase shares in the fourth quarter but plans to return to share repurchases in 2017. Alphabet ended the year with $86 billion in cash and marketable securities on its fortress balance sheet. Alphabet launched 350 artificial intelligence (AI) applications through all of its segments from Search, Google Maps, Gmail, Google Play, etc. The company is just scratching the surface with its machine learning and artificial intelligence efforts. YouTube has tremendous growth opportunities ahead of it by providing the best video experiences for users and continues to deliver original content. Google’s Cloud business made huge strides in 2016 in terms of data analytics, security and tools for application development. Google’s Cloud business should accelerate with the G-Suite of productivity tools now being used by more than three million customers. Google continues to build powerful open platforms such as Android, Chrome and Daydream. Google Play, Google Home and the Pixel phone all have great growth potential as well. Alphabet’s management said 2016 was a great year with the company firing on all cylinders in the fourth quarter and expects 2017 will shape up to be an even better year.

Polaris Industries-PII announced that its Board of Directors approved a 5 percent increase in the regular quarterly cash dividend, raising the payout to $0.58 per share. This increase represents the 22nd consecutive year of Polaris increasing its dividend. Scott Wine, Polaris’ Chairman and CEO, commented, “We are very proud of our 22-year history of increasing dividend payments. We have maintained a disciplined, consistent approach to returning cash to shareholders, and dividends remain one of the important ways we can deliver further value. We believe this most recent dividend increase underscores our confidence in Polaris’ future growth and profitability prospects, steady cash flow generation, and continued strong financial position.”

  1. Rowe Price-TROW reported fourth quarter revenues rose 4% to $1.1 billion with net income up 24% to $371 million and EPS up 28% to $1.50. These results included a $100 million insurance recovery, or $.24 per share, related to the Dell appraisal rights matter. Excluding the insurance recovery, adjusted net income and EPS rose 10% and 13%, respectively, during the quarter. For the full 2016 year, revenues were relatively flat at $4.2 billion with net income down 1% to $1.2 billion and EPS up 3% to $4.75 on lower shares outstanding. Return on shareholders’ equity in 2016 was a robust 23.7%. Assets under management decreased $2.1billion in the fourth quarter of 2016, but increased $47.7 billion for the full year to $810.8 billion as of Dec. 31, 2016 primarily due to market appreciation. The firm’s net cash outflows of $5 billion in the fourth quarter and $2.8 billion for the full year are largely attributable to institutional and intermediary clients reallocating from active U.S. equity strategies to passive investments. T. Rowe Price remains debt-free with ample liquidity including cash and investments of $2.5 billion at year end. During the year, the company paid $541 million in dividends and repurchased 10 million of its own shares, or 4% of shares outstanding, for $677 million at an average price of $67.69 per share. Over the past three years, the company has returned a total of $4.1 billion to shareholders in the form of dividends and share repurchases, representing more than 110% of earning over this period of time. William J. Stromberg, the company's president and chief executive officer, commented: "U.S. stocks advanced sharply in the fourth quarter of 2016, lifting major indexes to record highs and resulting in strong full-year gains for many investors. Economic growth finished 2016 on a strong note and investors grew more optimistic that the incoming administration and Congress will succeed in reducing regulations and taxes. International equity markets delivered positive but less strong results, held back by a strengthening U.S. dollar. Fixed income returns suffered in the quarter as interest rates rose following the U.S. elections. Full year returns, though, were solid, led by high yield and emerging market bonds. The trend to passive has been persistent and has accelerated in recent years. We cannot predict when it will reach a new equilibrium. Over the long term though, we expect well-executed active management to play an important ongoing role for investors and we are reinvesting in our company with the objective of sustaining the strong investment and service results we have historically achieved for our clients.”

Biogen-BIIB reported fourth quarter revenues rose 1% to $2.9 billion with net income down 22% to $649 million and EPS off 21% to $2.99, negatively impacted by the settlement and licensing agreement with Forward Pharma A/S which also provides for a cash payment of $1.25 billion to Forward Pharma. On a non-GAAP basis, net income and EPS rose 10% and 12%, respectively.  For the full year, revenues rose 6% to $11.4 billion with net income up 4% to $3.7 billion and EPS up 10% to $16.93.  On a non-GAAP basis, net income and EPS rose 12% and 19%, respectively. Return on shareholders’ equity in 2016 was a healthy 30.5%. In 2016, growth was driven from the company’s multiple sclerosis (MS) portfolio with a 9% increase in revenues from TECFIDERA. Together with AbbVie-ABBV, Biogen is launching ZINBRYTA as a new option for MS patients around the world. Management is pleased with the strong performance of BENEPALI, an etanercept biosimilar being commercialized in Europe. Biogen’s hemophilia products continue to perform well with the planned spin-off of this division, which will be known as Bioverativ, expected to occur on Feb. 1, 2017. Biogen shareholders will receive one share of Bioverativ for every two shares of Biogen held. In Dec. 2016, the U.S. FDA approved Biogen’s SPINRAZA for launch under priority review for the treatment of spinal muscular atrophy, a leading genetic cause of death in infants and toddlers that is marked by progressive, debilitating muscle weakness. Biogen continues to advance their product pipeline programs for Alzheimer’s disease, Pakinson’s and ALS with R&D expected to approximate 16%-17% of revenue in 2017. Cash and marketable securities increased 25% during the year to $7.7 billion, with long-term debt remaining steady at $6.5 billion. During the fourth quarter, the company repurchased 2.2 million shares for $651 million at an average price of $295.91 per share with plans to continue the share repurchase program in 2017 under the current $5 billion authorization. The Board of Directors appointed Michel Vounatsos as CEO, who previously held the position of executive vice president and chief commercial officer at Biogen. Management’s outlook for 2017 is for revenue in the range of $11.1 to $11.4 billion, representing 5% to 7% growth adjusted for the Bioverativ spin-off with GAAP EPS expected in the range of $18.00-$18.80 and non-GAAP EPS in the range of $20.45-$21.25.

Johnson & Johnson-JNJ and Actelion Ltd. announced that they have entered into a definitive transaction agreement under which Johnson & Johnson will launch an all-cash tender offer in Switzerland to acquire all of the outstanding shares of Actelion for $280 per share, or approximately $30 billion. The transaction is expected to be immediately accretive to Johnson & Johnson adjusted earnings per share and accelerate Johnson & Johnson revenue and earnings growth rates. Johnson & Johnson will fund the transaction with cash held outside the United States. Actelion has established a leading franchise of differentiated, innovative products for pulmonary arterial hypertension (PAH) that is highly complementary to the existing portfolio of the Janssen Pharmaceutical Companies of Johnson & Johnson. As part of the transaction, immediately prior to the completion of the acquisition, Actelion will spin out its drug discovery operations and early-stage clinical development assets into a newly created Swiss biopharmaceutical company ("R&D NewCo"). The shares of R&D NewCo, which will be listed on the SIX Swiss Exchange (SIX), will be distributed to Actelion's shareholders as a stock dividend upon closing of the tender.  Johnson & Johnson will initially hold 16% of the shares of R&D NewCo and have rights to an additional 16% of R&D NewCo equity through a convertible note. The arrangements will result in R&D NewCo launching with cash of CHF 1 billion to be made available at the closing of the transaction. Johnson & Johnson will also receive an option on ACT-132577, a product within R&D NewCo being developed for resistant hypertension currently in phase 2 clinical development. Together, these arrangements with R&D NewCo will provide Johnson & Johnson with additional sources of innovation and value. Post-transaction close, Johnson & Johnson expects the transaction to increase its long-term revenue growth rate by at least 1.0% and its long-term earnings growth rate by 1.5% - 2.0% above current analyst consensus. Johnson & Johnson estimates EPS accretion in the first full year of $0.35 to $0.40. Johnson & Johnson shareholders are also expected to realize additional value from the Johnson & Johnson ownership interest in R&D NewCo. The transaction is expected to close by the end of the second quarter of 2017. 

Wednesday, Jan. 25, 2017 F5 Networks-FFIV reported sales for the first fiscal quarter increased 5.4% to $516 million with net income increasing 5% to $94.2 million and EPS up 13% to $1.44 on fewer shares outstanding. Product sales, which grew 2% year-over-year to $239.5 million, were robust in the Americas, APAC and Japan in Q1, while sales in EMEA remained relatively soft, and were down year-over-year. F5 Networks array of recently introduced new products are closely aligned with major industry trends and the needs of large organizations worldwide. Migration of applications to public and private clouds, the build-out of hybrid cloud infrastructures, the explosion of SSL-encrypted traffic, and the need to provide security for applications, including the burgeoning array of Internet of Things (IoT) applications, all are expected to drive future product revenue growth. Service revenues were $276.5 million, up 8.5% from last year. During the quarter, F5 Networks generated $175 million in free cash flow, down 8% from last year’s first fiscal quarter, due to working capital demands. During the quarter, F5 Networks repurchased $150 million shares and ended the quarter with $1.2 billion in cash and investments on its debt-free balance sheet. Looking ahead to the second fiscal quarter, management has set a revenue goal of $518 - $528 million, up 8% year-over-year, at the midpoint. EPS are expected in the $1.41 to $1.44 range, up 28% from last year at the mid-point.

Qualcomm-QCOM reported fiscal first quarter revenues rose 4% to $6 billion with net income and EPS each down 54% to $700 million and $.46, respectively.  These results include an $868 million charge, or $.49 per share, which was accrued related to the Korea Free Trade Commission (KFTC) investigation. Excluding the litigation charge in the first quarter, underlying financial results were strong with net income up 21%. Qualcomm is appealing the KFTC decision. Legal and governmental actions against Qualcomm abound with recent actions taken against the company by the U.S. FTC and one of their largest customers, Apple, who is seeking to pay less for the Qualcomm technology they are using. Much of the conference call was devoted to management vigorously defending Qualcomm’s business practices and discussing the value of the company’s patent portfolio that have been instrumental to the success of the mobile communications industry. Qualcomm does not believe they have monopoly power or require exclusive dealings in their contracts.  Management noted they have historically had a strong relationship with Apple which they expect to continue despite the dispute. Qualcomm believes contract manufacturers will continue to report and pay royalties as contracted, and they do not expect any financial impact in their second quarter from the dispute with Apple. Free cash flow in the first quarter declined 52% to $1.3 billion due to lower earnings and higher inventories due in part to the timing of the Chinese New Year. The company paid $784 million in dividends during the quarter and repurchased 6.6 million shares of its own stock for $444 million at an average price of approximately $67.27 per share with $2.5 billion remaining authorized for future share repurchases. Cumulatively, Qualcomm has returned $55.3 billion to shareholders in the form of dividends and share repurchases.  Qualcomm ended the quarter with nearly $30 billion in cash on its balance sheet and $10 billion in long-term debt. In October 2016, Qualcomm announced plans to acquire NXP Semiconductors N.V. for $38 billion in cash with the transaction expected to close by the end of 2017. The NXP acquisition will accelerate the company’s transformation in the high growth areas of automotive, IoT, security and networking. Management’s outlook for the second quarter is for revenues in the range of $5.5 billion to $6.3 billion, representing a year-over-year change of a decrease of 1% to an increase of 13% with EPS expected in the range of $.89 to $.99, representing growth of 14% to 27%. 

Abbott Laboratories-ABT reported fourth quarter sales increased 3% to $5.3 billion with net income from continuing operations increasing 10% to $765 million and EPS from continuing operations increasing 11% to $0.51. Excluding acquisition related charges, net income and EPS from continuing operations increased 4% and 5%, respectively. For the full year, Abbott’s sales increased 2% to $21 billion, up 4.8% excluding the impact of foreign currency.  International sales accounted for nearly 70% of Abbott’s total 2016 sales.  Net income and EPS from continuing operations for 2016 dropped 59% to $1.1 billion and $0.71, respectively. These results include a $947 million mark-to-market charge related to Mylan N.V. shares owned by Abbott and a $480 million charge related to Abbott’s Venezuelan assets. Excluding these items and acquisition related charges, Abbott’s 2016 EPS from continuing operations increased 2.3% to $2.20.   By business segment, Nutrition 2016 sales declined 4% to $6.9 billion due to a 13% drop in international sales on the heels of challenging market conditions in China and Saudi Arabia. Medical Devices sales increased 4% to $5.2 billion, boosted by double-digit growth of MitraClip for the treatment of mitral regurgitation and the continued strong uptake of FreeStyle Libre, Abbott’s disruptive glucose monitoring system that eliminates the need for finger-sticks. Abbott’s 2016 Diagnostic sales increased 4% to $4.8 billion, led by sales of Abbott’s new Alinity family of diagnostic systems. Established Pharmaceuticals’ (EPD) 2016 sales increased a healthy 11% to $3.9 billion, led by double-digit growth in BRIC countries, which account for about 45% of total EPD sales. Subsequent to year-end, Abbott closed on its $25 billion acquisition of St. Jude Medical as part of its strategy to become the leader in the $30 billion cardiovascular market which is growing at a fast clip. Abbott took on $15 billion in debt to finance the transaction. Priorities for future free cash flow include paying down the debt while modestly increasing the dividend until targeted debt ratios are achieved. To that end, Abbott announced a 2% dividend increase during the quarter, marking the 372nd consecutive quarterly dividend paid by Abbott and the 45th consecutive year of dividend increases. Abbot is a member of the exclusive S&P 500 Dividend Aristocrats Index, which tracks companies that have annually increased their dividend for at least 25 consecutive years. When asked about his recent personal purchases of Abbott stock, Miles White, chairman and CEO, said he bought the stock because it represents an excellent value.   Abbott expects the pro-growth policy initiates of the new administration to help Abbott’s business. Tax reform proposals will allow Abbott to tap into overseas cash. A stable dollar will benefit Abbott’s business and proposed changes to the ACA will likely not impact Abbott’s space in U.S. healthcare market.  Looking ahead to 2017, Abbott expects EPS of $0.92 to $1.02 including expenses related to the integration of St. Jude Medical.

United Technologies-UTX reported fourth quarter revenues rose 2.5% to $14.7 billion with net income from continuing operations of $1.1 billion and EPS of $1.26. For the full year 2016, revenues increased 2%, including 2% organic growth, to $57.2 billion with net income up 25% to $5.4 billion and EPS up 35% to $6.13. The results in 2016 included $.48 per share of net restructuring and other significant items compared with $1.77 per share in 2015. On an adjusted basis, EPS increased 5% year over year. Return on shareholders’ equity for 2016 was a strong 18.6%. These solid results included the entry into service of the A320neo and CSeries programs in the aerospace business, more than 100 new products introduced in the Climate, Controls and Security business and increased global segment share for new equipment orders for Otis elevators. Free cash flow declined 8% during the year to $4.7 billion due to working capital changes with the company paying $2.1 billion in dividends and repurchasing $2.3 billion of its own shares during the year. Despite an uncertain global macro environment, the company’s growing aerospace backlog and strategic investments in the commercial businesses makes management confident in achieving higher organic growth in 2017 with organic sales growth of 2% to 4%. Total sales in 2017 are expected in the range of $57.5 billion to $59 billion generating adjusted EPS in the range of $6.30 to $6.60. Free cash flow is expected to approximate 90% to 100% of net income in 2017 with management earmarking $1 billion to $2 billion for potential acquisitions during the year and targeting $3.5 billion for share repurchase as they see intrinsic value of the business significantly higher than the current share price. Management is on target to return $22 billion to shareholders for the 2015-2017 period through dividends and share repurchases. Management continues to follow closely President Trump’s proposed changes to tax policy which would have a net positive benefit to the U.S. economy and United Technologies. The current discussion on tax reform is to lower the corporate tax rate to 20%, eliminate the deduction for interest expense and instead allow companies to immediately write-off their capital expenditures. The repatriation of foreign cash would have management revisit their disciplined capital allocation strategy with the likelihood that the dividend would be increased as they would then have access to their foreign cash with over half of their cash currently maintained outside the U.S.  

Cisco-CSCO announced its intent to acquire AppDynamics, Inc., a privately held application intelligence software company based in San Francisco. AppDynamics's cloud application and business monitoring platform enables the world's largest companies to improve application and business performance. Cisco will acquire AppDynamics for approximately $3.7 billion in cash and assumed equity awards. The acquisition is expected to close in Cisco's third quarter of fiscal year 2017.

AbbVie-ABBV announced the start of two Phase 2 clinical trial programs to evaluate ABBV-8E12, an investigational anti-tau antibody, in patients with early Alzheimer's disease and progressive supranuclear palsy (PSP). In recognition of the lack of treatment options available to patients with PSP, the U.S. Food and Drug Administration (FDA) granted Fast Track Designation to ABBV-8E12. The FDA and European Medicines Agency (EMA) also granted Orphan Drug Designations to ABBV-8E12 for PSP. "We see potential in ABBV-8E12 and tau-focused approaches to progressive neurodegenerative diseases, such as early Alzheimer's disease and PSP," said Eric Karran, vice president, Foundational Neuroscience Center, AbbVie. "The initiation of the Phase 2 clinical trial programs and the FDA's Fast Track Designation for PSP signify important steps forward in AbbVie's ongoing commitment to investigating innovative scientific approaches with the hope of bringing new treatment options to patients." Alzheimer's disease is a progressive, neurodegenerative disorder affecting approximately 34 million people worldwide with the patient population expected to nearly triple by 2050.10 It is the sixth leading cause of death in the U.S. and there are currently no treatments to prevent or delay disease progression. Progressive supranuclear palsy (also known as Steele-Richardson-Olszewski syndrome) is a progressive neurodegenerative disorder, with an estimated worldwide annual incidence of three to six per 100,000 people; and within the U.S., the disease affects approximately 20,000 individuals. The average onset of PSP symptoms typically begins after age 60. The most common features of PSP are loss of balance leading to unexplained falls, blurred vision, problems controlling eye movement and slurred speech. Other nonspecific symptoms of PSP, such as slowed movements or behavioral or cognitive changes, are similar to other brain disorders, particularly Parkinson's disease. For this reason, correct diagnosis of PSP is often delayed. The course of PSP is progressive and may predispose individuals to serious complications, such as choking, pneumonia, head injury and fractures caused by falls. Currently, there are no approved treatments for PSP.12 It is one of more than 20 different neurodegenerative disorders characterized by neurofibrillary degeneration and tau inclusions as a predominant central nervous system lesion.

Tuesday, Jan. 24, 2017 Styker-SYK reported fourth quarter sales increased 16% to $3.2 billion with net income declining 2% to $510 million and EPS declining nearly 3% to $1.34. Excluding the 10% impact of acquisitions, fourth quarter net sales increased a healthy 6.7% in constant currency, including 8.2% from increased unit volumes partially offset by 1.5% in lower prices. The acquisitions of Sage Products and Physio-Control International, which are growing at 12% and 7% respectively, contributed $258 million to fourth quarter sales. Excluding the impact of charges related to acquisitions, amortization and recalls, fourth quarter net income and EPS increased 14% to $675 million and $1.78, respectively. During the quarter, Stryker installed thirty-two MAKO robots, bringing the globally installed base to 381 robots. Fifty surgeons have been trained to teach the MAKO technique in anticipation of Stryker’s 2017 commercial rollout, which is expected to capture total knee replacement surgery market share for Stryker. For 2016, Stryker reported sales increased 14% to $11.3 billion with net income and EPS up 15% to $1.6 billion and $4.35, respectively.  Excluding acquisitions and charges, year-over-year sales increased 6.4% and EPS increased 13%. By segment, 2016 Orthopaedics sales increased 5% to $4.4 billion, led by mid-single growth in Knees and Trauma & Extremities. Medsurg sales surged 26% to $4.9 billion, driven by acquisitions, while Neurotechnology & Spine increased 10% to $2 billion. Stryker generated a solid 17.2% return on shareholders’ equity during 2016 and free cash flow of $1.3 billion. Stryker returned $581 million to shareholders during 2016 through dividend payments of $568 million and share repurchases of $13 million. During 2016, Stryker suspended its share repurchase program to focus on acquisitions. Stryker has reinstated its share repurchase program for 2017 and anticipates $250 million in share repurchases during the year to offset stock option dilution. For 2017, Stryker expects organic sales growth in the range of 5.5% to 6.5% and EPS to be in the $6.35 to $6.45 range.

Canadian National Railway-CNI reported fourth quarter revenue rose 2% to $3.2 billion with net income up 8% to $1 billion and EPS chugging 12% higher to $1.32 (all figures are in Canadian dollars). For the full 2016 year, revenues declined 5% to $12 billion with net income up 3% to $3.6 billion and EPS up 6% to $4.67. Return on shareholders’ equity was a smoking 24.5% in 2016. The decrease in total revenues for the year was primarily due to lower volumes of crude oil, coal and frac sand as the energy markets remained weak. Carloadings and revenue ton-miles both declined by 5% in 2016, although improving trends were experienced in the fourth quarter as carloadings increased 3% to 1.4 million and revenue ton-miles increased 4%. Higher volume in the fourth quarter was due to increased growth in Canadian grains and U.S. soybeans, refined petroleum products, finished vehicles and petroleum coke. These factors were partially offset by lower volumes of crude oil, U.S. thermal coal and drilling pipe. During 2016, CNI’s operating ratio improved 230 basis points to a record 55.9% thanks to improved productivity, technology innovation and great teamwork. Free cash flow increased 10% during the year to $2.5 billion, with the company returning 90% of net income to shareholders through dividends and share repurchases in 2016. The company announced a 10% increase in the dividend for 2017 as it moves towards its goal of a 35% dividend payout ratio with management also planning on $2 billion in share repurchases during the year. Management expects to deliver EPS growth in the mid-single-digit range in 2017 over adjusted EPS of $4.59 in 2016. While the economy remains challenging, CNI expects to see moderate volume growth of 3% to 4% in 2017 with pricing staying ahead of inflation. During the first three weeks of January, Canadian National experienced a 5.5% increase in carloadings while gaining market share from its competitors. Capital expenditures are expected to decline slightly in 2017 to $2.5 billion with $1.6 billion earmarked for track improvements and $400 million for Positive Train Control technology in the United States as the company continues to invest for the long term. Management indicated they saw no significant changes to their operations from political discussions revolving around NAFTA. Canada and the U.S. have been long-term trading partners with more balanced trade than that between the U.S. and Mexico.

3M-MMM reported fourth quarter sales increased slightly to $7.3 billion with net income up 11% year-on-year to $1.2 billion and EPS up 13% to $1.88. 3M's fourth quarter sales growth was broad-based with sales in the U.S. up 1.2%. APAC organic sales increased 2.4%, led by 6% local currency growth in China/Hong Kong and 3% growth in Japan. Latin American organic sales increased 4%, boosted by a 10% jump in Mexico. The 2.4% decline in EMEA sales was tempered sales in Germany, which have increased steadily for three consecutive quarters. By segment, Industrial sales increased 3% to $2.5 billion, led by automotive OEM sales which continue to outpace global auto builds. Safety & Graphics organic sales increased about 1% to $1.3 billion, powered by high-single digit growth in roofing granules and mid-single digit growth in Personal Safety sales.  Health Care sales dipped slightly to $1.379 billion, led by food safety, critical and chronic care, drug delivery systems and infection prevention.  During the quarter, 3M invested $30 million to accelerate future Health Care sales growth. Electronics and Energy sales declined by 1% to $1.2 billion. In Electronics, growth in electronics materials solutions sales were offset by a decline in display materials and systems. In Energy, growth in telecom were offset by declines in electrical markets and renewable energy. Consumer sales fell nearly 1% to $1.1 billion, hurt by declines in stationary and office sales that were partially offset by growth in home improvement, consumer health care and home care. During the quarter, 3M generated $2.2 billion in operating cash flow resulting in free cash flow conversion of 154% to $1.8 billion. This robust free cash flow allowed the company to invest in the business while returning $1.6 billion to shareholders during the quarter via dividends and share repurchases. For the full year, 3M reported a 0.5% dip in sales to $30.1 billion with net income of $5.1 billion, up 5% year-on-year, and EPS of $8.16, up nearly 8% on fewer shares outstanding. During the year, 3M generated a 23% return on invested capital and $5.2 billion in free cash flow, representing cash flow conversion rate of 104%. 3M returned $6.4 billion to shareholders during 2016 through share purchases of $3.7 billion and dividends of $2.7 billion, marking the 100th consecutive year of dividend payments by 3M. Given solid growth in the world’s four largest economies—U.S., China, Germany and Japan—management remains very positive about 2017. Organic sales are expected to grow by 1% to 3% with EPS up 4% to 8%, or $8.45 to $8.80. 3M’s 2017 effective tax rate is expected in the 28% to 29% range and free cash flow conversion is expected in the 95% to 105% range.

Polaris-PII reported fourth quarter revenue rose 10% to $1.2 billion, primarily due to an acquisition, with net income sliding 43% lower to $62.5 million and EPS down 42% to $.97. For the full year, revenues dropped 4% to $4.5 billion with net income down 53% to $212.9 million and EPS off 52% to $3.27. Margins were negatively impacted by higher promotional spending and increased warranty expense. Despite the lower earnings, the company generated a still impressive 24.5% return on shareholders’ equity. Polaris had a disappointing year in 2016 due to a series of recalls on their products, competitive pricing pressures and a decline in market demand, especially in the oil and agricultural segments for off-road vehicles (ORV). ORV dealer inventory was down 11% year-over-year with total dealer inventory down 8%. Despite lower earnings, free cash flow increased 90% during the year to $362.6 million due to working capital changes. Polaris paid $140 million in dividends during the year and repurchased 2.9 million of its shares outstanding for $245.8 million at an average price approximating $84.76 per share. The company has 7.5 million shares remaining authorized for future share repurchase. In Nov. 2016, the company completed the acquisition of TAP, a vertically-integrated manufacturer of off-road Jeep and truck accessories, for $669 million The company financed this acquisition in part with debt which boosted the company’s leverage to more than 100% of equity and more than doubled its interest expense. Polaris expects full-year 2017 adjusted EPS in the range of $4.25 to $4.50, representing 22% to 29% growth over last year’s depressed adjusted earnings. Full year sales are expected to increase in the range of 10%-13%, reflecting the impact of acquisitions. Excluding the acquisitions, organic sales are expected to be relatively flat, within a -1% to +1% growth rate over fiscal 2016 sales of $4.5 billion. Polaris announced that it is winding down its Victory Motorcycle operations in 2017 to improve the long-term profitability of its global motorcycle operations. The one-time costs associated with the closing of the Victory operation are not included in its non-GAAP guidance. Operating cash flow is expected to decline significantly in 2017 due in part to the costs associated with Victory winding down operations.

Johnson & Johnson-JNJ reported fourth quarter revenues rose 1.7% to $18.1 billion with net income up a healthy 19% to $3.8 billion and EPS up 20% to $1.38. For the full year 2016, revenues rose 3% to $71.9 billion with net income gaining 7% to $16.5 billion and EPS up 8% to $5.93. On an adjusted operational basis, sales and EPS growth was 7% and 9%, respectively in 2016. Growth was driven by the impressive performance of the Pharmaceutical group which increased sales by 6.5% to $33.5 billion, representing 47% of total revenues. The Medical Devices unit gained market share and posted revenues of $25.1 billion, accounting for 35% of total sales. Consumer sales decreased 1.5% to $13.3 billion, comprising 18% of total revenues, with profitability improving in the unit. During 2016, JNJ invested $9 billion in research and development, sustaining its investments in innovation with 243 product approvals announced during the year and a robust product pipeline going forward. In addition, the company completed 14 acquisitions and licensing agreements during the year. JNJ also completed 67 innovation deals and 21 new development deals. Free cash flow approximated $15.5 billion in 2016 with the company paying $8.6 billion in dividends and completing approximately 75% of its $10 billion share repurchase program with the balance expected to be completed in the first half of 2017. The company ended the year with $15 billion of net cash on its balance sheet, representing $42 billion in cash net of $27 billion in long-term debt.  The company’s capital allocation strategy is to 1) increase its dividend as it has done for 54 consecutive years, 2) make value-creating acquisitions, and 3) use excess cash for share repurchases. Over the last decade, the company has distributed 70% of its free cash flow in the form of dividends and share repurchases and 30% for acquisitions.  JNJ announced its 2017 guidance for sales of $74.1 billion to $74.8 billion, reflecting operational growth in the range of 4% to 5%, with adjusted EPS expected in the range of $6.93 to $7.08, reflecting operational growth of 4.8% to 7%. This growth is in line with the company’s long-term objective to have earnings grow faster than sales. As part of the company’s ongoing portfolio management, JNJ is evaluating potential strategic options for the JNJ Diabetes Care Companies. JNJ expects to complete the $4.3 billion acquisition of Abbott’s eye-care business in the first quarter of 2017 with ongoing acquisition negotiations continuing with Actelion Ltd, Europe's biggest biotechnology company, which if completed would be accretive to both the top and bottom lines.  Alex Gorsky, JNJ’s CEO,  met with President Trump recently and discussed healthcare reform, advocating for increased access to healthcare, the continued coverage of pre-existing conditions and continued coverage of young folks by their parent’s policies. JNJ also discussed tax reform with Trump supporting territorial taxation in line with other countries which would lower U.S. tax rates to be more competitive with the rest of the world, R&D incentives to support innovation and repatriation of cash held outside of the U.S.

Monday, Jan. 23, 2017 New research has found spinal cord stimulation (SCS) therapy can be key to reducing or stabilizing the use of opioids in patients battling chronic pain. In a new study, researchers examined opioid usage data from more than 5,400 patients both prior to and after receiving an SCS system implant. In an SCS system, an implanted device similar to a pacemaker delivers low levels of electrical energy to nerve fibers, interrupting pain signals as they travel to the brain to reduce the sensation of pain. Researchers have found that average daily opioid use declined or stabilized for patients receiving a successful SCS system compared to patient use of opioids prior to an implant. In addition, while opioid usage was not different for the two groups at time of implant, patients who underwent a successful SCS implant had significantly lower opioid use one year after their implant. Patients who had their SCS system removed saw their opioid use increase again over time. The study was sponsored by Abbott-ABT, a global leader in the development and manufacture of SCS systems and therapy options, such as the company's proprietary BurstDR™ stimulation. Currently, more than 2.1 million people in the U.S. suffer from substance abuse related to opioid pain relievers, while worldwide an estimated 15.5 million people are now classified as opioid dependent. Chronic pain is often a driver of opioid use as patients seek relief and improvements to their quality of life. Fortunately for patients, SCS therapy has been clinically proven to offer meaningful relief to patients suffering from chronic pain.

Apple-AAPL accused Qualcomm-QCOM of unfairly charging excessive royalties for its technology and is seeking damages of about $1 billion. Furthermore, Apple alleged that Qualcomm withheld $1 billion in payments as retaliation for Apple's cooperation with agencies investigating the company. In response, Don Rosenberg, executive vice president and general counsel of Qualcomm, said, "While we are still in the process of reviewing the complaint in detail, it is quite clear that Apple's claims are baseless. Apple has intentionally mischaracterized our agreements and negotiations, as well as the enormity and value of the technology we have invented, contributed and shared with all mobile device makers through our licensing program. Apple has been actively encouraging regulatory attacks on Qualcomm's business in various jurisdictions around the world, as reflected in the recent KFTC decision and FTC complaint, by misrepresenting facts and withholding information. We welcome the opportunity to have these meritless claims heard in court where we will be entitled to full discovery of Apple's practices and a robust examination of the merits.”

Friday, Jan. 20, 2017 American International Group announced that it has entered into a binding term sheet for an adverse development reinsurance agreement, effective January 1, 2016, with National Indemnity Company (NICO), a subsidiary of Berkshire Hathaway-BRKA. The agreement covers 80% of substantially all of AIG’s U.S. Commercial long-tail exposures for accident years 2015 and prior, which includes the largest part of AIG’s U.S. casualty exposures during that period. AIG will retain sole authority to handle and resolve claims, and NICO has various access, association and consultation rights. “The consideration for this agreement is $9.8 billion payable in full by June 30, 2017, with interest at 4% per annum from January 1, 2016 to date of payment. The consideration paid to NICO will be placed into a collateral trust account as security for NICO’s claim payment obligations to the AIG operating subsidiaries, and Berkshire Hathaway will provide a parental guarantee to secure the obligations of NICO under the agreement. NICO is assuming 80% of the net losses and net allocated loss adjustment expenses on the subject reserves in excess of the first $25 billion and NICO’s overall limit of liability under the agreement is $20 billion. This provides material protection to policyholders against adverse developments beyond current reserve levels.

  1. T. Rowe Price Group-TROW said it has entered an insurance agreement to recover $100 million after it made a voting error in the 2013 buyout of Dell Inc. The insurance recovery will be recognized its fourth-quarter results as an offset to a $166 million operating charge it took in the second quarter.

Ethicon Endo-Surgery, a unit of Johnson & Johnson-JNJ, announced that it has acquired Megadyne Medical Products, Inc., a privately held medical device company that develops, manufactures and markets electrosurgical tools used in operating rooms worldwide. The acquisition brings together the intelligence of Ethicon's* advanced energy devices with Megadyne's innovative portfolio of electrosurgical tools representing a major step forward in Ethicon's goal to deliver the most comprehensive suite of intelligent energy solutions that enhance precision and efficiency in the operating room. Financial terms of the transaction have not been disclosed.

Thursday, Jan. 19, 2017 AbbVie-ABBV announced the U.S. Food and Drug Administration (FDA) approved IMBRUVICA® (ibrutinib) for the treatment of patients with relapsed/refractory (R/R) marginal zone lymphoma (MZL) who require systemic therapy and have received at least one prior anti-CD20-based therapy. This indication is approved under accelerated approval based on overall response rate (ORR), and continued approval may be contingent upon verification and description of clinical benefit in a confirmatory trial. IMBRUVICA is jointly developed and commercialized by Pharmacyclics LLC, an AbbVie company, and Janssen Biotech, Inc., a unit of Johnson & Johnson-JNJ. "The FDA approval of IMBRUVICA for relapsed/refractory marginal zone lymphoma is significant, and we are proud of the culmination of this extensive clinical research program, representing the first approved treatment specifically for patients with this rare type of non-Hodgkin's lymphoma," said Darrin Beaupre, M.D., Ph.D., Head of Early Development and Immunotherapy at Pharmacyclics LLC, an AbbVie company. "This milestone marks the fifth patient population for whom IMBRUVICA is now approved and broadens the number of patients who may be treated with the medication. We continue to research IMBRUVICA across many disease areas, including but not limited to other B-cell malignancies." The FBI has awarded Accenture Federal Services (AFS)-ACN a seven-year blanket purchase agreement  with a $100 million ceiling for the provision of application services and the continued introduction of digital solutions to further enhance the bureau’s human resources (HR) systems capabilities. This award is a continuation of AFS’s technology and management consulting partnership with the FBI.

Wednesday, Jan. 18, 2017 Fastenal-FAST reported fourth quarter revenues rose 2.7% to $948 million with net income and EPS each up 2.6% to $114.8 million and $.40, respectively. For the full year, revenues rose 2.4% to $4 billion with net income down 3.3% to $499.5 million and EPS dipping 2% to $1.73. Return on shareholders’ equity for the year was an impressive 25.8%. During the past year, headcount declined 5% to a total employee headcount of 19,624 due to natural attrition. The net number of store locations at the end of the year declined 4.5% to 2,503 locations as the company consolidated locations. The number of active Onsite locations (dedicated sales and service provided within a customer’s facility) increased 52% to 401 locations during the year. The company expects to sign 275-300 new Onsite agreements in 2017. Fastenal continued to see a very strong pace of national account signings with 190 new contracts signed in 2016, up 14% from the prior year. National accounts now represent 47% of total revenue with management continuing to see substantial growth opportunities from these accounts as they gain market share. Margins were challenged in 2016 with gross margin down 80 basis points and operating margin down 130 basis points due in part to product mix changes. In 2017, Fastenal expects margins in 2017 to stabilize if growth is at the low to mid-single digit range or accelerate if growth picks up to the high single-digit range.  Fastenal has converted most of their U.S. stores to a new format, which expanded inventory placement in stores. This contributed to free cash flow declining 17% during the year to $325 million. Free cash flow is expected to improve in 2017 especially with capital expenditures expected to decline 35% to $119 million in 2017 as investments in industrial vending machines and the locker lease program are behind them. During fiscal 2016, Fastenal repurchased 1.6 million shares for $59.4 million at an average cost of $37.15 per share with 1.3 million shares remaining authorized for future share repurchases. Fastenal also paid $346.6 million in dividends during 2016 and announced a 7% increase in the dividend for 2017. For 2017, Fastenal is planning that the sluggish industrial economic environment will continue, especially in the general industrial markets which remains challenging. However, recent trends in the process industrial markets, such as the oil and gas sectors, appear more favorable.

Tuesday, Jan. 17, 2017 The U.S. Federal Trade Commission (FTC) has filed a complaint against Qualcomm-QCOM in the U.S. District Court in the Northern District of California. The FTC's complaint alleges that certain Qualcomm's business practices, which have enabled the growth and advancement of mobile communications worldwide, are in violation of U.S. competition law. Qualcomm believes the complaint is based on a flawed legal theory, a lack of economic support and significant misconceptions about the mobile technology industry. The complaint seeks to advance the interests and bargaining power of companies that have generated billions in profit from sales of products made possible by the fundamental 3G and 4G cellular technology developed by innovators like Qualcomm. The portrayal of facts offered by the FTC as the basis for the agency's case is significantly flawed. In particular, Qualcomm has never withheld or threatened to withhold chip supply in order to obtain agreement to unfair or unreasonable licensing terms. The FTC's allegation to the contrary -- the central thesis of the complaint -- is wrong. As FTC Commissioner Maureen Ohlhausen (who voted against the filing) explained in what she notes is a rare dissenting statement, the Commission's 2-1 decision to sue Qualcomm is "an enforcement action based on a flawed legal theory (including a standalone Section 5 count) that lacks economic and evidentiary support, that was brought on the eve of a new presidential administration, and that, by its mere issuance, will undermine U.S. intellectual property rights in Asia and worldwide." As Commissioner Ohlhausen notes, it is telling that the complaint does not allege that Qualcomm charges above fair and reasonable royalties. Despite an appeal from members of Congress to refrain from "midnight litigation" with novel and untested legal theories that could damage competition in the U.S., the FTC accelerated the investigation of Qualcomm and directed the filing of the complaint just days before the change of the Administration though only three of five FTC commissioners are in place. Qualcomm plans to vigorously contest the complaint.

Biogen-BIIB  announced that it has agreed to enter into a settlement and license agreement with Forward Pharma, subject to the approval of Forward Pharma’s shareholders and other customary conditions. The license agreement will provide Biogen an irrevocable license to all intellectual property owned by Forward Pharma. Upon the effectiveness of the settlement and license agreement, Biogen will provide Forward Pharma a cash payment of $1.25 billion. Under certain circumstances outlined in the agreement, Biogen will pay Forward Pharma royalties on net sales of Biogen products for the treatment of multiple sclerosis that are covered by a Forward Pharma patent and have dimethyl fumarate (“DMF”) as an active pharmaceutical ingredient.

Friday, Jan. 13, 2017 Biogen-BIIB presented new data from the Phase 3 ENDEAR study of SPINRAZA™ (nusinersen), which demonstrated a statistically significant reduction in the risk of death or permanent ventilation in SPINRAZA-treated infants with spinal muscular atrophy (SMA) compared to untreated infants. “Although ENDEAR was stopped early based on positive interim results, the study still demonstrated that a significantly greater number of infants treated with SPINRAZA survived and did not require permanent ventilation. These data further underscore the impact SPINRAZA may have on individuals living with this devastating disease,” said Wildon Farwell, M.D., M.P.H., senior medical director, Clinical Development, Biogen. “We are very encouraged that individuals with SMA have already started treatment with SPINRAZA this week in the U.S., and we continue to work closely with regulatory agencies to bring this therapy to patients around the world as quickly as possible.”

Thursday, Jan. 12, 2017 MAXIMUS-MMS announced that its Remploy subsidiary was awarded a spot in Region Six (Wales) on the Umbrella Agreement for the provision of Employment and Health Related Services (UAEHRS). The UAEHRS is a framework that is expected to be used by the U.K. Government for the provision of certain employment and health services, including some contracts for the new Work and Health Programme. Remploy is a leading provider of specialist employment services for people with disabilities and health conditions in the U.K. Since 2010, Remploy has found more than 100,000 jobs in mainstream employment for people with a range of physical, sensory and learning disabilities, mental health conditions and other disadvantages. Richard A. Montoni, Chief Executive Officer for MAXIMUS, commented, “We are pleased to secure a spot on the highly competitive UAEHRS framework. While we had hoped to secure a greater number of regions on the framework, there will be companion opportunities that are available to MAXIMUS. This includes subcontracting partnerships that we are already working on. More importantly, the U.K. Government continues to devolve responsibility down to the local authorities and we currently anticipate that some of the Work and Health contracts will be directly procured by certain local authorities outside of the framework. With several contract awards already in place for fiscal year 2017 and a healthy pipeline of opportunities, our U.K. human services business remains well-positioned over the long term.”

Wednesday, Jan. 11, 2017 AbbVie-ABBV expects fiscal 2017 adjusted EPS growth of 13%-15% with adjusted net revenue growth in the low double-digit range. The company expects to produce top-tier revenue growth and double-digit EPS growth on average through 2020.

Gilead Sciences-GILD announced that the European Commission has granted marketing authorization for Vemlidy®(tenofovir alafenamide, TAF) 25 mg, a once-daily tablet for the treatment of chronic hepatitis B virus (HBV) infection in adults and adolescents (aged 12 years and older with body weight at least 35 kg). The marketing authorization allows for the marketing of TAF in the 28 countries of the European Union, Norway and Iceland. “As the first new treatment for chronic hepatitis B to be approved in Europe in nearly a decade, this approval marks a step forward in the management of a progressive, life-threatening disease affecting 13 million Europeans,” said Professor Pietro Lampertico, Head of the Gastroenterology and Hepatology Division at the Fondazione IRCCS Ca’ Granda Ospedale Maggiore Policlinico, University of Milan, Italy. “Treating a lifelong disease such as chronic hepatitis B can present challenges as patients age, and the improvements in bone and renal laboratory safety parameters demonstrated by TAF compared to TDF allow it to provide an important new option for patients.”

FedEx and Walgreen-WBA announced a long-term alliance agreement that will offer convenient access to FedEx dropoff and pickup services at thousands of Walgreens locations across the United States beginning within the next several months.  “Working with FedEx to provide safe and secure delivery locations while making it easy for customers to ship returns and other packages through the FedEx networks is another way we are becoming America’s most loved pharmacy-led health, wellbeing and beauty retailer,” said Reuben Slone, Walgreens senior vice president of supply chain. “We look forward to providing our customers with these convenient options that will be available whenever the store is open.”

Tuesday, Jan. 10, 2017 Stryker-SYK reported preliminary consolidated net sales of $3.2 billion and $11.3 billion increased 16.3% and 13.9% as reported in the fourth quarter and full year. Excluding the impact of foreign currency and acquisitions, net sales increased 6.7% and 6.4% in the fourth quarter and full year. The acquisitions of Sage Products LLC and Physio-Control International, Inc., which closed in early April 2016, contributed $258 million and $740 million to the consolidated net sales in the fourth quarter and full year. Based on the strong organic net sales growth, Stryker expects 2016 adjusted net earnings per diluted share to be at the high end of the previously stated range of $5.75 to $5.80, an increase of 12.3% to 13.3% over 2015. The full year negative foreign currency exchange impact was approximately $0.10 to $0.12 per share, while the fourth quarter includes a negative impact of approximately $0.02 to $0.04 per share.

Monday, Jan. 9, 2017 Polaris Industries-PII announced it will immediately begin winding down its Victory Motorcycles brand and related operations. Polaris will assist dealers in liquidating existing inventories while continuing to supply parts for a period of 10 years, along with providing service and warranty coverage to Victory dealers and owners. Polaris will reduce the appropriate operating cost based on this decision, while continuing to support the future growth of the ongoing motorcycle business. Polaris remains committed to maintaining its presence in the Spirit Lake, Iowa community with Indian Motorcycle production and in the Huntsville, Alabama community with its Slingshot production. Any one-time costs associated with supporting Victory dealers in selling their remaining inventory, the disposal of factory inventory, tooling, and other physical assets, and the cancellation of various supplier arrangements will be recorded in the 2017 income statement in respective sales, gross profit and operation expense. These costs will be excluded from Polaris’ provided 2017 sales and earnings guidance on a non-GAAP basis.

Thursday, Jan. 5, 2017 Gentex-GNTX launched a new vehicle-based biometric identification system that authenticates the driver and delivers customized security, comfort and convenience features. The system can also be used to help secure and enhance vehicle-to-home automation services as well as vehicle-to-infrastructure transactions. Gentex’s automotive biometric solution stems from a strategic partnership with Delta ID, which has developed an ActiveIRIS® technology that combines unique iris-recognition software with a simple hardware set that can be easily integrated into mobile computing devices. Delta ID’s technology powers iris recognition on smartphones, tablets and other devices currently, and is a proven leader in biometric identification. Gentex and Delta ID recently completed a strategic partnership agreement for automotive, which included Gentex securing an equity investment in Delta ID. Iris recognition is the most secure form of biometric identification, with a false acceptance rate as low as one in 10 million, far superior to facial, voice, or even fingerprint recognition. Gentex’s future plans include integrating biometric authentication with HomeLink, the company’s car-to-home automation product that uses RF and wireless cloud-based connectivity to operate garage doors, security systems, thermostats, home lighting and more. The biometric system will allow HomeLink to provide added security and convenience for multiple drivers by activating the unique home automation presets of different authorized users. “This type of system will also be perfect for new and evolving mobility solutions, such as car sharing programs,” said Steve Downing, Gentex senior vice president. “The iris scan would identify the driver, authorize vehicle use and allocate payment, including incidentals like tolls and parking, and eventually even gas and fast food.”

Private sector employment increased by 153,000 jobs from November to December according to the December ADP National Employment Report®. "As we exit 2016, it's interesting to note that the private sector generated an average of 174,000 jobs per month, down from 209,000 in 2015," said Ahu Yildirmaz, vice president and head of the ADP Research Institute. "And while job gains in December were slightly below our monthly average, the U.S. labor market has experienced unprecedented seven years of growth that has brought us to near full employment. As we enter 2017, the tightening labor market will likely slow the growth."  Mark Zandi, chief economist of Moody's Analytics, said, "Job growth remains strong but is slowing. The gap between employment growth in the service economy and losses on the goods side persists. Smaller companies are struggling to maintain payrolls while large companies are expanding at a healthy pace."

Walgreens Boots Alliance-WBA reported fiscal first quarter revenues declined 2% to $28.5 billion with net income down 5% to $1.1 billion and EPS off 4% to $.97, reflecting the lower impact of UK tax reductions. On a constant currency basis, revenues rose 1.1% with adjusted net earnings up 8.2%. Retail Pharmacy USA sales increased 1.4% to $20.7 billion with comparable store sales growth of 1.1%. Pharmacy sales accounted for 69.1% of the division’s sales and increased 2.5%. The division filled 237.6 million prescriptions, an increase of 3% over the year ago quarter primarily due to continued growth in Medicare Part D volume. The division’s retail prescription market share increased approximately 40 basis points to 19.5%. Retail Pharmacy International sales decreased 14.4% during the quarter to $3 billion due to the negative impact of currency translation. On a constant currency basis, sales increased .5%. Pharmaceutical Wholesale sales decreased 6.5% to $5.4 billion, but increased 4.7% on a constant currency basis with adjusted operating income up 45% on a constant currency basis. Free cash flow declined 63% in the first quarter to $147 million primarily due to working capital changes. During the quarter, the company paid $406 million in dividends and repurchased $457 million of its shares. Walgreens pending acquisition of Rite Aid is expected to close in the early part of this calendar year after its sale of 865 Rite Aid stores to Fred’s, Inc. for $950 million in cash. Taking into account the expected divestitures, Walgreens expects that the Rite Aid acquisition will be accretive to its adjusted EPS in the first full year after closing of the transaction. The company also expects to realize synergies from the acquisition in excess of $1 billion, to be fully realized within three to four years of closing the merger. Walgreens raised the lower end of its guidance for fiscal 2017 by $.05 and now anticipates adjusted EPS in the range of $4.90 to $5.20, which assumes accretion of $.05 to $.12 from Rite Aid.

Wednesday, Jan.4, 2017 Apple-AAPL confirmed that it plans to invest $1 billion in SoftBank Group Corp.’s new SoftBank Vision Technology fund to help finance technologies it could use in the future.  Apple has worked with the Japanese telecom company for many years. Qualcomm-QCOM and Oracle-ORCL also plan to invest in SoftBank’s $100 billion technology fund.